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--4.4.1 FACTORS INFLUENCING LOCATION--
--MANUFACTURING BUSINESS--
--MANUFACTURING BUSINESS--
--TYPE OF PRODUCTION METHODS/SCALE--
--TYPE OF PRODUCTION METHODS/SCALE--
If JOB PRODUCTION is used, then SCALE IS PROBABLY LOW and the company DOES NOT NEED to be located CLOSE TO SUPPLIES to REDUCE TRANSPORTATION COSTS.
If FLOW PRODUCTION is used, then SCALE IS HIGH and the company NEEDS TO BE located close to its supplies to reduce transportation costs.
--PROXIMITY TO MARKET--
--PROXIMITY TO MARKET--
SOME MANUFACTURERS NEED TO BE LOCATED NEAR TO THEIR MARKET AS THE GOODS ARE PERISHABLE OR EXPENSIVE TO TRANSPORT.
--RAW MATERIALS & COMPONENTS--
--RAW MATERIALS & COMPONENTS--
SOME MANUFACTURERS NEED TO BE LOCATED NEAR TO THE PRODUCERS OF ITS MAIN COMPONENTS IN ORDER TO CUTS DOWN ON TRANSPORTATION AND PROCESSING COSTS
--EXTERNAL ECONOMIES OF SCALE--
--EXTERNAL ECONOMIES OF SCALE--
EXTERNAL ECONOMIES OF SCALE REFER TO THE ABILITY OF A FIRM TO ACHIEVE LOWER AVERAGE COSTS, NOT BECAUSE THEY GROW IN SCALE, BUT BECAUSE THE INDUSTRY GROWS IN SCALE, AND AS S RESULT INFRASTRUCTURE, SUPPORT FIRMS, SUPPLIERS, POTENTIAL WORKERS ALL MOVE CLOSER TO YOU, LOWERING YOUR AVERAGE COSTS AS A RESULT.
FOR EXAMPLE, IF YOU ARE LOCATED IN SILICON VALLEY OR A FAMOUS SCIENCE PARK, YOU DO NOT HAVE TO LOOK FAR AND WIDE FOR PROGRAMMERS AS THEY ARE ALREADY ATTRACTED TO THE AREA, ALSO MANY SUPPLIERS WILL SET UP CLOSE BY TO BE NEAR ALL THEIR CUSTOMERS, SUCH AS TECH SUPPORT FIRMS.
--AVAILABILITY OF LABOUR--
--AVAILABILITY OF LABOUR--
If the manufacturing process REQUIRES A LOT OF UNSKILLED WORKERS they may LOCATE IN A HIGH UNEMPLOYMENT AREA
If the manufacturing process REQUIRES SKILLED WORKERS they may LOCATE IN AN AREA WHERE A LOT OF PEOPLE ARE GRADUATES.
--GOV'T INFLUENCE--
--GOV'T INFLUENCE--
Governments often offer GRANTS TO BUSINESSES if they LOCATE IN AN AREA OF HIGH UNEMPLOYMENT.
Governments can BAN THE PRODUCTION OF THE FIRM’S PRODUCT FORCING THEM TO RELOCATE.
--TRANSPORT & COMMUNICATIONS--
--TRANSPORT & COMMUNICATIONS--
CLOSE TO A GOOD ROAD, RAIL, AIR AND WATERWAY SYSTEMS.
PHONE LINES, INTERNET CONNECTIONS ETC…
--POWER & WATER SUPPLY--
--POWER & WATER SUPPLY--
AVAILABILITY OF A RELIABLE SUPPLY OF ELECTRICITY & WATER
--OWNERS PREFERENCE--
--OWNERS PREFERENCE--
QUALITY refers to
--CLIMATE--
--CLIMATE--
Some products REQUIRE CERTAIN CLIMATES TO THRIVE, in particular agriculture and the wine industry.
--TASK--
--TASK--
Imagine you are the operations manager of a large Singapore-based MANUFACTURING firm that has chosen to relocate to China. WRITE A LETTER to your SHAREHOLDERS explaining your decision. You need to INCLUDE AT LEAST 5 OF THE ABOVE FACTORS TO JUSTIFY THE MOVE. Be sure to make your answer specific to manufacturing.
Go to ChatGPT an write a prompt similar to this:
"Using the EPL and football as the context write an essay explaining how the following FACTORS INFLUENCING LOCATION for a new football stadium
--TYPE OF PRODUCTION METHODS/SCALE--
--PROXIMITY TO MARKET--
--RAW MATERIALS & COMPONENTS--
--EXTERNAL ECONOMIES OF SCALE--
--AVAILABILITY OF LABOUR--
--GOV'T INFLUENCE--
--TRANSPORT & COMMUNICATIONS--
--POWER & WATER SUPPLY--
--OWNERS PREFERENCE--
--CLIMATE--
--SERVICE BUSINESS--
--SERVICE BUSINESS--
--PROXIMITY TO CUSTOMERS--
--PROXIMITY TO CUSTOMERS--
If the service REQUIRES DIRECT PHYSICAL CONTACT WITH CUSTOMERS, then the firm must be LOCATED NEARBY, for example, PLUMBERS, ELECTRICIANS, and HAIRDRESSERS.
If the service DOESN'T REQUIRE DIRECT PHYSICAL CONTACT WITH CUSTOMERS and INSTEAD CAN BE CONDUCTED OVER THE PHONE or INTERNET then the firm can be LOCATED ANYWHERE, for example, UK firms use CALL CENTRES in INDIA.
--OWNER PREFERENCES--
--OWNER PREFERENCES--
BUSINESS OWNERS often WISH TO WORK NEAR THEIR HOMES for the sake of convenience.
--ABILITY TO USE TECHNOLOGY--
--ABILITY TO USE TECHNOLOGY--
If the service can be conducted via the INTERNET or the PHONE, then firms DO NOT NEED TO LOCATE NEAR THEIR CUSTOMERS, for example, 'DIGITAL NOMADS' such as WEB DESIGNERS, PROGRAMMERS can locate ANYWHERE and benefit from lower rents and cost of living.
--AVAILABILITY OF LABOUR--
--AVAILABILITY OF LABOUR--
If a LARGE NUMBER OF WORKERS ARE REQUIRED then locating in a CITY or TOWN would be better, in addition, if a CERTAIN SKILL IS REQUIRED it may also be necessary to LOCATE TO THAT AREA, for example, Silicon Valley in the US.
--CLIMATE--
--CLIMATE--
This is particularly important for HOSPITALITY businesses such as HOTELS, which need to be in locations with PLEASANT WEATHER CONDITIONS.
--PROXIMITY TO OTHER BUSINESSES--
--PROXIMITY TO OTHER BUSINESSES--
Some services serve the needs of large businesses and hence locate close to these businesses, for example computer repair services and banks.
--RENT/TAXES--
--RENT/TAXES--
If it isn;t necessary to locate in the city centre, firms may choose to locate in lower rent areas.
--TASK--
--TASK--
Imagine you are the operations manager of a large Singapore-based CUSTOMER CARE SERVICE firm that has chosen to relocate to INDIA. WRITE A LETTER to your SHAREHOLDERS explaining your decision. You need to INCLUDE AT LEAST 5 OF THE ABOVE FACTORS TO JUSTIFY THE MOVE. Be sure to make your answer specific to the service sector.
--RETAIL BUSINESS--
--RETAIL BUSINESS--
--PROXIMITY TO SHOPPERS --
--PROXIMITY TO SHOPPERS --
QUALITY refers to
--PROXIMITY TO OTHER SHOPS --
--PROXIMITY TO OTHER SHOPS --
QUALITY refers to
--PARKING FACILITIES--
--PARKING FACILITIES--
QUALITY refers to
--VACANT PREMISES--
--VACANT PREMISES--
QUALITY refers to
--RENT/TAX--
--RENT/TAX--
QUALITY refers to
--ACCESS FOR DELIVERY SERVICES--
--ACCESS FOR DELIVERY SERVICES--
QUALITY refers to
--SECURITY--
--SECURITY--
QUALITY refers to
--LEGISLATION--
--LEGISLATION--
QUALITY refers to
--TASK--
--TASK--
Imagine you are opening a well-known COFFEE SHOP FRANCHISE (YOU WILL BE THE FRANCHISEE) at WHITESANDS MALL. WRITE A LETTER to your FRANCHISOR explaining your decision. You need to INCLUDE AT LEAST 5 OF THE ABOVE FACTORS TO JUSTIFY THE MOVE. Be sure to make your answer specific to the retail sector.
--WHY LOCATE OVERSEAS?--
--WHY LOCATE OVERSEAS?--
--REDUCE TRANSPORTATION/FREIGHT COSTS--
--REDUCE TRANSPORTATION/FREIGHT COSTS--
In manufacturing, when sales to overseas customers increase significantly, it may be COST EFFECTIVE to relocate production to these regions to REDUCE TRANSPORTATION COSTS.
--CLOSER TO RAW MATERIAL SOURCE--
--CLOSER TO RAW MATERIAL SOURCE--
Clearly, if a firm is having to ship-in large amounts of a raw material, it may again be COST-EFFECTIVE to relocate production to where the raw material is in abundance.
--LABOUR AND RISING WAGE ISSUES--
--LABOUR AND RISING WAGE ISSUES--
If WAGES ARE RISING it may be COST-EFFECTIVE for a LABOUR-INTENSIVE firm to relocate to a country with relatively lower wages.
If WAGES ARE RISING due to a LACK OF SUPPLY of suitable labour it will be COST-EFFECTIVE for a LABOUR-INTENSIVE firm to relocate to a country with a LARGER LABOUR POOL.
For example, many firms set up manufacturing bases in China, due to its abundance of MANUAL LABOUR.
--RISING RENT & TAX ISSUES--
--RISING RENT & TAX ISSUES--
HIGHER TAX AND RENTAL RATES, end up INCENTIVISING FIRMS TO RELOCATE to low tax. low rent countries allowing them to earn greater profits.
--HOST COUNTRY INCENTIVES--
--HOST COUNTRY INCENTIVES--
Foreign countries MAY SEEK TO INCENTIVISE FIRMS TO RELOCATE TO THEIR COUNTRY in order to help grow its economy and create employment opportunities by OFFERING GENEROUS FINANCIAL GRANTS and LOW TAX RATES.
--AVOID TRADE BARRIERS--
--AVOID TRADE BARRIERS--
When a firm exports goods to overseas customers, they will have to pay IMPORT TAXES KNOWN AS 'TARIFFS' BEFORE THEIR PRODUCT ENTERS, MAKING THEM HIGHER PRICED AND UNCOMPETITIVE IN THE FOREIGN MARKET, therefore if the firm was to relocate production to that country THEY WOULD BE ABLE TO AVOID PAYING THIS TAX, and hence their goods would be cheaper and more competitive.
--ROLE OF LEGAL CONTROLS--
--ROLE OF LEGAL CONTROLS--
-- WHY DO GOV'T'S WiSH TO INFLUENCE LOCATIONS?--
-- WHY DO GOV'T'S WiSH TO INFLUENCE LOCATIONS?--
To ENCOURAGE FIRMS TO SET UP IN AREAS OF HIGH UNEMPLOYMENT in areas called 'DEVELOPMENT AREAS'.
To ENCOURAGE FIRMS FROM LOCATING IN OVERCROWDED AREAS in areas deemed of 'NATURAL BEAUTY'.
--HOW DO GOV'TS INFLUENCE LOCATION?--
--HOW DO GOV'TS INFLUENCE LOCATION?--
By requiring firms to OBTAIN PLANNING PERMISSION, before relocating.
By offering GRANTS & SUBSIDIES to attract firms.
--POTENTIAL PROBLEMS--
--POTENTIAL PROBLEMS--
--EXCHANGE RATE FLUCTUATIONS--
--EXCHANGE RATE FLUCTUATIONS--
When relocating overseas, the firm will need to use the new HOST COUNTRY'S CURRENCY to pay for local wages, and rent however, it may earn Its REVENUE and PROFIT in ANOTHER CURRENCY as such if the LOCAL RATE APPRECIATES (BECOMES MORE EXPENSIVE) IN TERMS OF THE OTHER CURRENCY, they will need to EXCHANGE MORE OF THEIR PROFIT CURRENCY, lowering their overall profits.
--CULTURAL/POLITICAL/SOCIAL ISSUES--
--CULTURAL/POLITICAL/SOCIAL ISSUES--
Some countries have strict CULTURAL TRADITIONS that need to be taken into consideration, such as NATIONAL HOLIDAYS, and RELIGIOUS FESTIVALS, which will impact WORK DAYS.
POLITICAL/SOCIAL UNREST can cause serious disruption to production.
FREQUENT REGIME CHANGE could threaten the STATUS QUO.
--LANGUAGE/COMMUNICATION ISSUES--
--LANGUAGE/COMMUNICATION ISSUES--
The obvious communication problems that may arise could lead to DISECONOMIES OF SCALE.
--LACK OF INFRASTRUCTURE--
--LACK OF INFRASTRUCTURE--
Depending on the level of development of the host country, a LACK OF INFRASTRUCTURE, such as a RELIABLE POWER & WATER SUPPLY as well as ROAD, SEA, and AIR services, could cause serious disruptions to production.
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