4.6.1 Main factors which influence location decisions (3)
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1.
A manufacturing company, "Precision Parts Ltd," produces components for the automotive industry. They are currently located in a rural area but are experiencing increasing difficulties with transport costs and access to skilled labour. They are considering relocating their factory. Recommend and justify an appropriate location for Precision Parts Ltd.
Recommended Location: A location within a well-established industrial estate near a major port, such as the South Wales Valleys or the Humber region.
Justification:
- Transport Costs: Proximity to a major port (e.g., Milford Haven, Immingham) significantly reduces transport costs for raw materials and finished goods. This is crucial for a manufacturing business dealing with large components.
- Skilled Labour: Industrial estates often have a concentration of skilled workers in manufacturing, engineering, and logistics. The South Wales Valleys and Humber region have a strong history in these industries, providing a readily available workforce.
- Infrastructure: Industrial estates typically have the necessary infrastructure, including reliable power supply, water, and waste disposal systems.
- Government Incentives: Governments often offer incentives to attract manufacturing businesses to specific regions, such as tax breaks and grants. These incentives can help offset relocation costs.
- Supply Chain Integration: Being located near other automotive suppliers facilitates supply chain integration and reduces lead times.
- Land Availability: Industrial estates usually have available land for expansion and future growth.
Alternative Considerations: A location near a major motorway network could also be considered, but this would likely result in higher land costs and potentially higher transport costs for long-distance shipments.
2.
Question 1: A large car manufacturer is considering relocating its production facility. Identify and explain four factors that the manufacturer would need to consider when making this decision. Explain the relative importance of these factors.
Answer 1: A car manufacturer relocating its production facility faces a complex decision with numerous factors to consider. Here are four key factors and their relative importance:
- Cost of Labour: This is often a very important factor. Manufacturers seek locations with a skilled workforce that can be employed at a competitive wage. Lower labour costs can significantly reduce overall production expenses. However, the quality of labour is also crucial; a low wage workforce might require more training, offsetting the cost savings. (High Importance)
- Transport Links: Efficient transport links are vital for both receiving raw materials and distributing finished vehicles. Proximity to major ports, railways, and highways reduces transportation costs and lead times. Consideration must be given to the cost and reliability of these links. (High Importance)
- Government Incentives & Regulations: Governments often offer incentives such as tax breaks, grants, and relaxed environmental regulations to attract investment. The regulatory environment, including planning permissions and environmental standards, can also significantly impact the cost and ease of operation. (Medium Importance)
- Market Access: Proximity to the target market is important for reducing distribution costs and responding quickly to consumer demand. This might involve locating near major population centres or within a region with strong trade links. Consideration should also be given to import/export tariffs and trade agreements. (Medium Importance)
Relative Importance: The relative importance of these factors will vary depending on the specific circumstances of the car manufacturer. For example, a manufacturer heavily reliant on imported components might prioritize transport links. A manufacturer targeting a specific domestic market might prioritize market access. However, cost of labour and transport links are generally considered the most critical.
3.
A clothing manufacturer is considering locating a new factory in either Bangladesh or Vietnam. Prepare a table comparing the advantages and disadvantages of each country as a potential location. Consider factors such as cost of labour, infrastructure, political stability, and access to markets.
Here's a table comparing Bangladesh and Vietnam as potential locations for a clothing manufacturer:
Country | Advantages | Disadvantages |
Country | Advantages | Disadvantages |
Bangladesh | - Very low labour costs
- Large and relatively inexpensive workforce
| - Infrastructure can be poor
- Political instability can be a concern
- Lower skill levels in the workforce may require more training
|
Vietnam | - Improving infrastructure
- More stable political environment than Bangladesh
- Higher skill levels in the workforce
- Good access to markets in Asia
| - Higher labour costs than Bangladesh
- Competition from other garment manufacturers
|
Note: This table provides a general overview. Specific conditions and costs can vary depending on the region within each country and the specific requirements of the clothing manufacturer. Further research and due diligence are essential before making a final decision.