Answer to Question #193860 in Marketing for Peth

Question

How are country differences, production technology and production factors all affect the choice of where to locate production activities?

Answer 1

When fixed costs are substantial, the minimum efficient scale of production is high,

and/or flexible manufacturing technologies are available, the arguments for concentrating

production at a few choice locations are strong.

Country factors that can affect location decisions include:

• the availability of skilled labor and supporting industries
• formal and informal trade barriers
• expectations about future exchange rate changes
• transportation costs
• regulations affecting FDI

A firm should locate its various manufacturing activities where the economic, political, and cultural conditions, including relative factor costs, are conducive to the performance of those activities.

Also; The type of technology a firm uses in its manufacturing can affect location decisions.

Three characteristics of manufacturing technology that are of interest may include:

• the level of fixed costs
• the minimum efficient scale
• the flexibility of the technology

Also; Two product factors impact location decisions:

• the product's value-to-weight ratio:
• whether the product serves universal needs

Lastly, there are two basic strategies for locating manufacturing facilities:

• concentrating them in the optimal location and serving the world market from there
• decentralizing them in various regional or national locations that are close to major markets