4.2.3 Assessment of a country as a production location

• Costs of production

  • Businesses want to keep costs of production low - helps them increase their profit margin or allow them to sell at a lower price to gain a competitive advantage.
• Skills & availability of labour force

  • Good quality workforce = good quality product - more efficient at what they do.
  • look at literacy rates
  • If business locates to place with a wide pool of skills = less unemployment.
  • Locations with decreased labour costs.
• Infrastructure

  • Need of good roads for transportation from manufacturer to retailer. (production process)
• Location in trade bloc

  • Able to access advantages - reduced protectionist measures.
• Return on Investments

  • Assessing ROI in different markets reduces risk of initial investment not being paid for.
  • Investment appraisal method (NPV, ARR, Payback) tells a business what their potential ROI is.
• Natural resources

  • Located near to raw materials = reduced product miles - reduced transportation costs - reduce potential delays.
• Political Stability

  • Risk of not getting their ROI in country with political issues.
  • Country - subject to corruption, lack of law enforcement & high levels of crime.
  • Stable economy & government - less risky for business.
• Ease of doing business

  • Business would want to locate where there is limited bureaucracy - process of establishing production facilities - not delayed & doesn't incur high costs.
• Government incentives

  • Grants, Tax breaks & loans from government = lowered costs.