Unit 5.4 Glossary of key terms - Location

Bulk-increasing industries

Businesses that need to be located near to their customers because the final product (such as hand-made home furniture) is bulkier and heavier than the raw materials used to make it.

Bulk-reducing industries

Businesses that need to be located near to the raw materials that are used to produce a certain good (such as a brewery) as the weight of the final output is less than that of the raw materials.

Clustering

Refers to firms choosing to locate near other businesses operating in related industries. This enables them to benefit from passing trade (customers) and the demand for goods and services in complementary or related markets.

Footloose organizations

Are those that do not have to locate in any particular area. Instead, they can choose to locate almost anywhere, as there are no cost advantages of locating in any particular geographical area.

Industrial inertia

exists when a business chooses to remain in the same location even though there are no cost advantages in doing so.

Infrastructure

Is a generic term referring to the physical structures and facilities required for the efficient running of a country. The infrastructure of a geographical area (location) includes its transportation systems, telecommunications networks, social infrastructure, and public utilities.

Insourcing

refers to the use of an organization’s own resources in order to fulfil a specific job, function, or project instead of it being outsourced to a third-party provider.

Offshoring

is an extension of outsourcing but involves relocating part of or all of an organization’s functions and processes overseas.

Outsourcing

is the use of third-party subcontractors for carrying out non-core activities of an organization in order to improve operational efficiency and reduce production costs.

Reshoring

is the practice of bringing back business functions to the domestic country from overseas, i.e., it is the opposite of offshoring.

Subcontractors

are outsourced firms (producers or suppliers) that perform the non-core activities for their clients (other businesses).