1. IB Business Management
5.4 Location

2. Learning Outcomes
The reasons for a specific location of production AO2
The following ways of reorganizing production, both nationally and internationally: AO3
outsourcing/subcontracting
offshoring
insourcing

3. Key Question
Location, Location, Location….. Why is the decision on where to locate production so important?

4. Location matters because….
The wrong location can have huge impacts on:
Operational costs
Customer service levels
Quality
Also, changing location if the wrong decision is made can be very expensive

5. International and national location decisions
Brainstorm and create a mindmap of the factors which would affect a firm’s decision on where to locate their production. Make sure that you consider these areas…..
Labour
Inputs
Land
Transport
Political/
Economic
Community/Social

6. Labour Factors Cost of labour Skill of labour Language
Employment legislation

7. Inputs Availability and cost of raw materials
Availability and cost of energy
Lead times from suppliers

8. Land Cost of land (rent or buy) Availability of suitable land/premises
Opportunities for expansion
Infrastructure
What might make these factors more/less important?

9. Transport
Issues affecting the cost/time of transporting raw materials and finished goods
Distance to suppliers
Distance to customers
Proximity to rail, road, air, links
What might make these factors more/less important?

10. Political/Economic factors
Political stability
Grants/Incentives
Business assistance available
Import/Export tariffs
Exchange rate stability
Inflation rates
Red tape/legislation

11. Community/Social factors
Nearby facilities and amenities
Proximity to competitors (external economies of scale)
Support services
Natural disasters

12. Is the Philippines an attractive location for locating production
Write a list of pros and cons of the Philippines as an international location

13. What factors would be the most important for these businesses?
Location Decisions

14. A car component manufacturer who supplies to Toyota

15. A Foxconn Factory to produce iPhones

16. A potato farm supplying McDonalds

17. An insurance company call centre

18. Are the following statements true/false. Explain why….
Task

19. Businesses will always locate as far away from their competitors as possible

20. The cheapest location is usually the best one to pick

21. It is more important for tertiary sector businesses to locate near to their customers

22. Manufacturing businesses must locate close to their suppliers so they can get their raw materials quicker

23. Location and the changing environment……
How could these issues impact on business location decisions?

24. The rise of E-Commerce

25. Decrease in shipping costs

26. Task
Watch the video…… ‘How containerization shaped the modern world’

27. The work of the World Trade Organization (WTO) to ensure that trade flows as smoothly, predictably and freely as possible.

28. Emerging Markets

29. Relocation

30. Think….
Industrial inertia describes a stage at which an organisation chooses to run in its current location although the main alluring factors are gone.
Why might a firm be reluctant to relocate?
What factors might make a business consider relocation?
Relocation is usually a decision that is costly in the short-term but cost saving in the long term

31. Difficulties of Relocation:
Physical Relocation costs
Loss of skilled and loyal workers
Possibly new suppliers needed
Potential damage to corporate image
Redundancy payments
Loss of production during transition phase

32. Question….
Which of the tools you have covered in the BM syllabus might be useful for businesses who are:
Deciding whether to relocate or stay in their current location?
Trying to decide between 3 alternative locations for their new factory?

33. Reorganising Production
Outsourcing/subcontracting
Offshoring
Insourcing
Reorganising Production

34. Task Write 2 mark definitions for the following terms:
Outsourcing/subcontracting
Offshoring
Insourcing

35. Outsourcing/Subcontracting Production – Key Questions
Why might businesses make the decision to outsource/subcontact?
What difficulties might be encountered?

36. Off-Shoring– Key Questions
Why might businesses make the decision to Off-Shore?
For which types of business might this be a particularly attractive option?
What would the key factors affecting the choice of country be?
What difficulties might be encountered?

37. Insourcing– Key Questions
Why might businesses make the decision to insource?
What would insourcing involve?
How might this impact on business costs?
What difficulties might be encountered