5.5 — Location

Question 1

Define ‘ business location’:

Answer 1

Geographical position of a business’ operations
Directly affects its costs / revenues / competitiveness / long-term success

Question 2

What does location influence?

Answer 2

• prices charged
• wages paid
• access to market + suppliers
• brand image + customer perception

Question 3

State reasons for producing in a specific location

Answer 3

1. Cost / availability of land (cheaper in rural or industrial zones)
2. Cost / availability of labour (labour cheaper or more skilled)
3. Nearness to markets (customers)
4. Local infrastructure
5. Government incentives
6. Clustering (shared customer base)
7. Footloose organisations
8. Bulk-gaining or bulk reducing industry

Question 4

State 1 adv and 1 dis of operating in prime locations

Answer 4

✅ high customer traffic
❌ high overheads a reduce product margin

Question 5

State 3 advantages of being located near to customers and which type of enterprises need it.

Answer 5

Retail + service firms

✅ faster delivery
✅ lower transport costs
✅ higher sales potential (access to mass market)
✅ strong competitive advantage

Question 6

State an implication of operating in a location with poor and good infrastructure

Answer 6

Good infrastructure: higher efficiency + lower costs
Poor infrastructure: delays + higher operating costs

Question 7

What are bulk gaining and bulk reducing industries?

Answer 7

Bulk-Gaining: Industries where the final product weighs more than the raw materials, so production is located close to customers
✅ Reduces distribution costs of heavy finished products

Bulk-Reducing: Industries where the final product weighs less than the raw materials, so production is located near raw material sources.
✅ Minimises transport costs of heavy inputs

Question 8

What are footloose organisations ?

Answer 8

Businesses that a can locate almost anywhere as they aren’t dependant on raw materials / markets / heavy transport needs

(Eg, online businesses / aerospace firms )

Question 9

What is industrial inertia? State one advantage and one disadvantage

Answer 9

When a business remains in its existing location even though no cost advantage exists there
Often due to worksforce resistance or relocation costs

✅ worker stability
❌ loss of competitiveness if costs are high

Question 10

Define outsourcing

Answer 10

Practice of havin an external organisation perform some specific aspect of a business’ operations
(Eg, customer service, distribution, marketing, production=

Question 11

Evaluate outsourcing (4/4)

Answer 11

✅ access to specialist expertise = increased quality
✅ lower operation costs
✅ greater flexibility
✅ allows forms to focus on core activities
❌ loss of control over quality
❌ risk of supplier failure
❌ possible job losses (can reduce morale of remaining staff / redundancy costs)
❌ confidentiality risks

Question 12

Define offshoring

Answer 12

When a business moves a businesses process from one country to another (eg, manufacturing)
Usually to benefit from lower cots

Question 13

Evaluate offshoring (4/3)

Answer 13

✅ Lower labour & production costs
✅ Access to new markets
✅ Tax advantages
✅ Increased global competitiveness
❌ Transport & logistics costs
❌ Time zone & cultural barriers
❌ Political & legal risks

Question 14

Define insourcing

Answer 14

Business brings in previously outsourced activities back in the firm

Question 15

Evaluate insourcing (3/3)

Answer 15

✅ Greater control over quality
✅ Improved data security
✅ Faster communication
❌ Higher labour costs
❌ Requires capital investment
❌ Less flexibility

Question 16

What is reshoring?

Answer 16

When a business relocates production back to its original home country after offshoring

Question 17

State 4 advantages and 3 disadvantages for reshoring

Answer 17

✅ Better quality control
✅ Shorter supply chains
✅ Faster delivery times
✅ Lower geopolitical risk
❌ Higher wages & production costs
❌ Reduced price competitiveness
❌ Expensive relocation

Question 18

Explain impact of location on the 4 business functions

Answer 18

Human Resources → recruitment, wages, motivation
Finance → costs, taxation, profit margins
Marketing → customer access, brand image
Operations → transport, efficiency, supply chains