Wednesday 18 September 2013

35 Analysis of what determines the change in a businesses location

Analysis of what determines a change in business location?

A business location is a crucial factor for many businesses but just how important depends on the TYPE of business and the GOODS or SERVICES it PRODUCES.

Starter - Developing Exam Skill Analysis click here can you spot the different stages (links) that had to be carried out for Wallace to fall asleep. Analysis is about the chain of argument that you are trying to put across.

Activity - Choosing the right location - Silent debate

FIRSTLY we need to consider the FACTORS of PRODUCTION needed to produce the product.
  • RAW MATERIALS - raw materials and a reliable POWER source need to be handy.  Extraction of RAW MATERIALS can only take place where the RAW MATERIALS are located.
  • PEOPLE / LABOUR What labour or specialists do I need.
  • LAND - and FACTORY's - What space do I need? What transport links do I need, What storage do I need?  Q. Why did Reggie Reggie Sauce set up in WALES?
TRANSPORT needs to be considered in relation to this - a wholesaler may need to be close to a good transport distribution network such as RAIL or MOTORWAY (BMW, CADBURY)  these vital services are called INFRASTRUCTURE (power, transport, communication, water).

SECONDLY you need to be close to your MARKET well if your a RETAILER you do and also located close to transport links so goods can be delivered..  GEOGRAPHICAL factors might be important to a power station but less so to a RETAIL outlet.Q. What does an e- commerce internet selling operation need? Q. Can this be located anywhere in the world? Businesses selling a service needs to be located close to its customers i.e hair dressing but an internet information and advice customer care service center can be located anywhere in the world.  Do UK customers like this? Does the location makes make any difference to the service or quality of advice? i.e. online bank, insurance company etc.

THIRDLY a business may start by making itself convenient to its customers but as it grows it will need to focus more on keeping the costs down whilst increasing revenue.  Costs can be kept down by either being near to the MARKET or near the RAW MATERIALS.  Revenue can be increased by being able to sell at convenient locations or setting up where GOVERNMENT GRANTS are available.  To read more on the topic click here 

Going International
Whats the main decision you need to make before you decide to move abroad? Clue can you E_ _ _ _ _

Activity - Location Manager Investigation
  • Why did DYSON move from WALES
  • What was the thinking about putting Euro Disney near PARIS
Questions you need to be able to answer - based on location for a growing business
  1. Name the factors of production
  2. What s meant by 'infrastructure'?
  3. Name TWO services that have to be close to the customer
  4. Name TWO services that can be GEOGRAPHICALLY different from the customer 
  5. Give one way that a growing business can keep costs low
  6. Give one way that a growing business can increase revenue
  7. Give TWO possible problems with overseas locations
  8. Give TWO reasons why a business might need to locate near to its market?
  9. Explain why a BMW might decide to keep production in the UK and export goods rather than set up a plant overseas.
  10. Explain why DYSON and the Cigarette Manufacturers decided to move production overseas 
location overseas

Homework - Key terms

  • Factors of production - the expensive resources needed to manufacture goods and include land, labour, machinery and capital
  • Agents - anyone in business acting on behalf of another person or organisation who can be used to find suppliers and employees and customers before a company relocates to the new area as they grow.
  • Infrastructure - the network of power, transport and communication systems that allow a business to connect up and work in a new location.
  • Export - when goods and services are sent out from one country to the other.  BMW export 80% of the cars that they manufacture in Cowley
  • Revenue - the value of sales generated by a business over a period of time and is calculated using the equation quantity sold x unit selling price
  • Overheads - are the fixed costs that do not alter when the business activity changes and would include things like salaries, loan interest, and insurance. 
  • Multinational - a business operating in more than one nation an example of this would be Honda Cars, Coca Cola, Burger King
  • Traditional industries - industries that are often labour and or machinery intensive and include such things as mining, steel production, fishing etc 
  • Off shore - companies that set up business activities outside the company that they are registered in to gain some benefit such as tax incentives, start up capital or less demanding working conditions, rules and legislation.  
  • Globalisation - the shifting wants and needs from one country to another as they are discovered on vacation and become demanded by customers on their return home.

Stretch & Challenge
 read the link here and answer the second nine mark question below

9 mark question - Relocating to China

Zak Lilly has just told his workforce that he is closing the factory.  His business makes plastic pipes and tubing that are used by plumbers across the UK.  Zak was born in Manchester and had tried to keep production there for as long as possible, but he knows he can no longer make a profit with a UK base.  The market is very competitive and unless he produces abroad he will go out of business fairly soon.  Zak feels sad about shutting the UK factory down but feels he has no choice.  He has found a cheap site in China and is moving production there in the next few months.
  •  What is meant by ‘Profit’?                                                                                         (2 marks)
  • Explain how moving production to China might help Zak’s business to survive  (5 marks)
  • Discuss the ways in which the stakeholders of Zak’s business will be affected by the relocation.                                                                                                                      (9 mark)
  • What do you think might be the biggest problems with moving production to China? Explain your reasons?                                                                                               (9 marks)

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