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4.2.3 Assessment of a country as a production location - Coggle Diagram
4.2.3 Assessment of a country as a production location
factors to consider
Cost of production
many locate to low production cost countries - may gain competitive advantage in market
main production costs
labour
energy
raw materials
land
low wages often important factor for attracting businesses, particularly for those who employ large workforce
cost of energy + land = increase impact on location plans for some businesses
Skills + availability of labour force
business has to consider if workforce has skills needed to maintain quality standards
may have to invest in training if workers are unskilled + poorly educated
need to consider if there's enough workers for the future
Infrastructure
need to identify its infrastructure needs + determine whether country is able to meet them
in some countries, where labour is cheap, quality of infrastructure may not support large production facilities
roads may be poorly/inadequately maintained + constructed
slows down transportation to consumers + supplies
inadequate access to broadband networks - limited/slow/unreliable communication
may not have access to modern airports + ports = difficult for business personnel to travel + ship good out of country (if railway underdeveloped = lack of bulk/heavy goods transportation)
More factors to consider
Location in trade bloc
locate facilities in trade blocs to avoid trade barriers
business located inside trade bloc benefits from trade liberalisation when sold to any member of bloc
5.Government incentatives
keen to attract FDI - as it brings income + employment - done by providing incentives
offer financial incentives e.g. tax breaks, lower rates of company tax, interest-free loans, cheap land etc
financial incentives often offered locating in developing countries e,g, Kenya, Tanzania (East Africa)
Ease of doing business
trading restrictions + additional costs may put off businesses
Factors that determine this
efficiency of tax collection
amount of bureaucracy e.g. how easy it is to get permits for construction projects
ease at which business can be started + shut down
efficiency with which contracts are enforced
availability of trade credit
ease of resolving insolvency
Even more factors
Political stability
some are unstable = too dangerous to do business, exposure to financial loss may be too hgih due oto politcial tensions
one problem: kidnapping - widely reported that Western business people targets for kidnaps to extract ransoms
Natural rescources
Some need large quantities of natural resources e.g. Mining - can limit country + area to locate to
Likely return on investment
During decision making process - SWOT/PESTLE can help assess suitability of locations
quantitive technqiues can be used to find location decision + aid evalutation of financial costs + benefits of inevesting in locations