Business & Globalisation (Edexcel GCSE Business)

Costs of production

• Businesses want to keep costs of production low as this can help them increase their profit margin or allow them to sell at a lower price to gain a competitive advantage

Skills and availability of labour force 

• The quality of the workforce is important as this will directly impact the quality of the goods and services produced in an economy
   
• Businesses may choose to locate production in a market where the labour costs are lower

Infrastructure 

• Businesses need to consider the infrastructure needed such as roads as this will affect the production process

Location in a trading bloc 

• A business located in a market within a trade bloc will be able to access many advantages such as reduced protectionist measures 
  • E.g. Japanese companies Nissan and Toyota have invested in manufacturing facilities in the UK (prior to Brexit) to gain access to the EU market

Return on investments 

• Assessing the return on investment in different markets will reduce the risk of the initial investment not being paid for

Natural Resources 

• It is often important that a business has easy access to their raw materials as this can help to reduce transportation costs and help to reduce any potential delays to the production process

Political Stability 

• Businesses may be at risk of not gaining a return on their investment in a country with political instability
   
• An economy with a stable economy and government is seen as a less risky investment for a business

Ease of doing business 

• A business will want to locate in an area where there is limited bureaucracy, so the process of establishing production facilities is not delayed or does not incur high costs

Government Incentives 

• Businesses may be offered incentives (e.g. grants, business loans and tax breaks) by the government 

• The MNC can gain access to cheap labour and/or raw materials
   
• Local residents may benefit from job opportunities and growth in the local economy
  
  
• MNCs often invest to improve infrastructure
  • Better roads, transportation and access to water and electricity would help the local community in addition to helping the MNC operate more efficiently
    
    
• MNCs may have to pay taxes and business rates to local councils/ authorities
  • These funds may be reinvested back into the local community
    
    
• MNCs can establish charitable initiatives that have a positive effect on the local community

• MNCs may cause damage to local habitats/environment during production process
  • E.g. Shell has a track record of oil pollution in vulnerable communities in Nigeria
     
• MNC's may leave unsightly production facilities behind once they have extracted all of the resources and left the country