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Factors in locating a business
Costs
Competition
Type of land
Markets
Familiarity with the area
Labour pool
Infrastructure
Suppliers
Government
National, regional or international ambition
Bulk increasing
Buying in many components and building something bigger like a car or TV.
Bulk decreasing
Buying in large quantities of raw materials and turning them into smaller end products such as paper mills/glass foundries.
Pull factors of globalisation
Improved communications
Easy to transport products around the world.
Dismantling of trade barriers
Easy to trade around the world with less barriers stopping them.
Deregulation on the world’s financial markets
Easy to transfer sums of money to start up business.
Increasing size of multinational companies
Easier to set up in other countries.
Push factors of globalisation
By expanding they may be able to:
Reduce costs
Closer to materials
Cheaper labour
Increasing market share
Tap into a new market.
Maybe harder due to different cultures, language barriers, local laws, etc.
Using extension strategies
Want to extend life cycle of their products
New areas, new markets.
Using defensive strategies
Doing it so their competitors don't do it first.
Outsourcing (subcontracting)
Using another business to complete a part of their work.
The business can focus on its core activity.
Advantages of outsourcing
Reduce costs
Focus on core activities
Improved capacity utilisation
Reduced delivery time
Transfer of expertise
Disadvantages of outsourcing
Dependent on the supplier - what if they become unreliable
Less control on final product
Dilution of brand. Consumers realise that it's not produced by the company at all.
Offshoring
Extension of outsourcing - outsourcing outside the home country.
Cultural differences
Communication may be different due to language and time zones
Issues of quality and ethics.
Insourcing
The practice of performing peripheral activities internally within the company.
Opposite of outsourcing
Want to feel in full control.
Reshoring
The practice of bringing back business functions to the home country.
Opposite of offshoring.
Business still uses external providers just in home country.
