Page 239 - Cambridge IGCSE Business Studies

18: Location decisions

EXPLORE! Why businesses locate their operations to another country
As well as local location factors, some businesses may decide to locate
Investigate businesses in

your local area. Select three their operations in another country. This decision is usually for one of the
businesses, ideally one each following reasons:
from the primary, secondary and
tertiary sector. Try to choose ■ To achieve growth – location overseas might be the best way of achieving growth
one business which has recently for companies whose sales have reached their maximum level in the home market;
opened. the product in the maturity stage of its life cycle.
Why do you think each of
■ To reduce production costs – for example, labour costs in countries such as
these businesses has located in
your local area? India, China and Eastern Europe are much lower than in Western Europe,
Japan and the USA.
■ To locate production closer to the market – this reduces delivery time to
customers and reduces transport costs.

TOP TIP
When explaining why a factor is
important, it is helpful if you can
give reasons why you feel the 237
factor is important. For example,
don’t just say that the location is
cheaper; explain how it will save
the business money.

Figure 18.2 There are several reasons for relocating a business overseas
Product life cycle
maturity stage: see

Chapter 12, page 168. International location decisions have their own benefits and limitations, which will
influence the fi nal decision.

Th e benefi ts include:
■ Lower labour costs – businesses may decide to relocate from a high labour
cost country to one where labour costs are much lower. For example, Dyson, a
UK manufacturer of vacuum cleaners, relocated its production from the UK to
Malaysia.
■ Access to global markets – the development of the economies of many countries
around the world has opened up markets to businesses whose sales in their home
market have no further opportunity to grow because the product has reached the
maturity stage of its life cycle. Although businesses could simply export their goods

into these countries, it is often much easier and more successful to locate operations
in the country. Several multinational companies have located factories close to their
international markets; for example Coca-Cola has manufacturing operations in many
countries throughout the world including, Pakistan, Argentina, Costa Rica, Nigeria
and Jordan.