Influences on the Choice of Production Location (Cambridge (CIE) O Level Business Studies)

A business located in a market within a trade bloc will be able to access many advantages, such as reduced protectionist measures 

• E.g. Chinese companies are increasingly locating operations in countries with trade agreements with the EU and US to circumvent restrictions on products made in those countries

Governments may offer incentives (e.g. grants, business loans and tax breaks) to locate in their country as MNCs bring in investment, foreign currency and job opportunities

Businesses may choose to locate production in a market where labour costs are lower or where significant numbers of workers have specialist skills

• Clothing brands frequently locate production facilities in lower-wage countries such as Bangladesh or Turkey, where skilled workers produce high-quality garments

Some countries tax businesses and their employees at very low rates

• Ireland's low rate of corporation tax has attracted large multinationals, including Google and Microsoft, to the country

Some countries have cheaper raw materials or are sources of rare raw materials that are used in the production process

Many businesses choose to locate near to customers in another country to reduce transport and distribution costs
 

This is particularly important when markets in the businesses home country have become saturated
 

External factors such as changes in the law may have made the home market unviable so growth may only be possible by moving the business to an alternative location

Regulations limit the operations of businesses in certain locations

• Opening hours can be restricted

Planning permission has to be agreed and granted before a business can build on or extend a site

• The appearance of new buildings may be strictly regulated

Brompton Bikes is the UK's  largest bicycle manufacturer

• Its planning application for a new factory involves construction on a floodplain, which will restore the local wetland and promote walking and cycling

Grants and subsidies encourage businesses to set up and expand in areas of high unemployment, underdeveloped regions or those that have suffered from industrial decline

This assistance could be grants or subsidies paid to businesses which do not normally need to be repaid

The EU offers a range of grants to businesses that are prepared to set up or expand in less developed areas of the trade bloc to reduce differences in wealth between regions and between the various member states