Answer to Question #193860 in Marketing for Peth

Question #193860

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


1
Expert's answer
2021-05-18T15:37:01-0400

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

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