For this chapter, you should be able to...
1. explain the reasons for a specific location of production
2. discuss the following ways of reorganizing production, both nationally and internationally:
1. explain the reasons for a specific location of production
2. discuss the following ways of reorganizing production, both nationally and internationally:
- outsourcing or subcontracting
- offshoring
- in-housing or re-shoring
1. factors locating a business
- Costs = may arise from land, labor, transport
- Competition
- Type of land
- Markets
- Familiarity with the area
- Labor pool
- Infrastructure = refers not only to the existing transport networks for people and products, but also to electronic networks
- Suppliers
- Governments
2. THE IMPACT OF GLOBALIZATION ON LOCATION
Pull factors = factors that pull companies to set up abroad
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Push factors = factors that push companies to operate overseas
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3. outsourcing
Outsourcing (or subcontracting) = the practice of employing another business to perform some peripheral activities (this enables the organization to focus on its core activity)
Advantages:
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Disadvantages:
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4. offshoring
Offshoring = the practice of subcontracting overseas (outsourcing outside the home country)
- All the advantages and disadvantages of outsourcing apply, but the international aspect usually intensifies them as follows:
- Cultural differences between the companies may exist
- Communication could sometimes be difficult
- Issues of quality and ethics may exist
5. In-housing and reshoring
In-housing (or insourcing) = the practice of performing peripheral activities internally, within the company
- Opposite to outsourcing.
- the business decision to stop outsourcing may be motivated by the desire to regain full control, or to reduce costs of taxes, labor and transportation
- Opposite to offshoring
- Purpose is to refocus on the quality end of the market