Are legal controls the most important factor for a manufacturing business to consider when deciding which country to locate its operations in? Justify your answer.
CAMBRIDGE
O level and GCSE
Year Examined
October/November 2022
Topic
Distribution Channels
👑Complete Model Essay
The Importance of Legal Controls in Manufacturing Location Decisions
When a manufacturing business decides to set up operations in a new country, numerous factors demand careful consideration. While access to affordable suppliers and labor are undeniably important, this essay argues that legal controls are the most crucial factor. This is because legal restrictions have the potential to completely halt production, unlike challenges related to labor or materials, which can be managed and overcome.
Legal controls encompass a wide range of regulations and restrictions imposed by governments on businesses operating within their jurisdiction. These can include environmental regulations, labor laws, taxation policies, and import/export restrictions. Failure to comply with these regulations can lead to severe consequences, including hefty fines, lawsuits, and even the shutdown of operations. For example, a manufacturing plant that fails to meet environmental standards regarding waste disposal could face closure, regardless of its access to cheap labor or materials. This demonstrates the potentially crippling impact of legal controls on a manufacturing business.
While access to cheaper raw materials and affordable labor can certainly impact profitability, these factors are less critical than legal controls. If a country presents legal barriers that prevent production, the advantages of cheap resources become irrelevant. Businesses can often find ways to mitigate challenges related to labor and material costs. For instance, a company struggling with high labor costs in one region might invest in automation or explore outsourcing options to countries with lower wages. Similarly, difficulties in sourcing affordable materials can be addressed by identifying alternative suppliers or exploring substitute materials.
The case of the textile industry in Bangladesh illustrates this point. While Bangladesh enjoys a competitive edge due to its low labor costs, the country has faced criticism and boycotts from international buyers due to its poor record on labor rights and safety standards ("The Rana Plaza Disaster", The New York Times, 2013). This example highlights how legal and ethical considerations can overshadow even the most significant cost advantages.
In conclusion, while access to affordable labor and materials are important considerations for manufacturing businesses, legal controls are paramount. The ability of legal frameworks to completely impede operations sets them apart as the most crucial factor influencing location decisions. A business can overcome challenges related to labor and materials, but operating within the boundaries set by a country's legal landscape is non-negotiable.
Are legal controls the most important factor for a manufacturing business to consider when deciding which country to locate its operations in? Justify your answer.
Note: Business Studies Pack Required
Score Big with Perfectly Structured Business Studies Essays!
Prepare effortlessly for your A/AS/O-Level exams with our comprehensive...
Business Studies Pack.
✅ Model Essays for past papers questions
✅Covers Cambridge Exam Boards
✅ Suitable for A Level
✅A Library of over 400 Essays
✅ Download all Essays in PDF format
...and much more!
Free Essay Plan 🍃
The Importance of Legal Controls in Manufacturing Location Decisions
When a manufacturing business decides to set up operations in a new country, numerous factors demand careful consideration. While access to affordable suppliers and labor are undeniably important, this essay argues that legal controls are the most crucial factor. This is because legal restrictions have the potential to completely halt production, unlike challenges related to labor or materials, which can be managed and overcome.
Legal controls encompass a wide range of regulations and restrictions imposed by governments on businesses operating within their jurisdiction. These can include environmental regulations, labor laws, taxation policies, and import/export restrictions. Failure to comply with these regulations can lead to severe consequences, including hefty fines, lawsuits, and even the shutdown of operations. For example, a manufacturing plant that fails to meet environmental standards regarding waste disposal could face closure, regardless of its access to cheap labor or materials. This demonstrates the potentially crippling impact of legal controls on a manufacturing business.
While access to cheaper raw materials and affordable labor can certainly impact profitability, these factors are less critical than legal controls. If a country presents legal barriers that prevent production, the advantages of cheap resources become irrelevant. Businesses can often find ways to mitigate challenges related to labor and material costs. For instance, a company struggling with high labor costs in one region might invest in automation or explore outsourcing options to countries with lower wages. Similarly, difficulties in sourcing affordable materials can be addressed by identifying alternative suppliers or exploring substitute materials.
The case of the textile industry in Bangladesh illustrates this point. While Bangladesh enjoys a competitive edge due to its low labor costs, the country has faced criticism and boycotts from international buyers due to its poor record on labor rights and safety standards ("The Rana Plaza Disaster", The New York Times, 2013). This example highlights how legal and ethical considerations can overshadow even the most significant cost advantages.
In conclusion, while access to affordable labor and materials are important considerations for manufacturing businesses, legal controls are paramount. The ability of legal frameworks to completely impede operations sets them apart as the most crucial factor influencing location decisions. A business can overcome challenges related to labor and materials, but operating within the boundaries set by a country's legal landscape is non-negotiable.
Extracts from Mark Schemes
Legal Controls: The Most Crucial Factor in Manufacturing Location Decisions
When deciding on the most crucial factor for a manufacturing business to consider when choosing a country to locate its operations in, legal controls play a significant role. Legal controls may restrict the company from setting up operations in certain areas, potentially leading to a halt in production. Furthermore, adhering to specific legal requirements may force the business to alter its production methods, consequently driving up costs.
On the other hand, factors like access to suppliers offering cheaper raw materials can help in reducing production costs. Similarly, access to affordable labor can contribute to lowering variable costs. Nevertheless, legal controls are deemed most important since they can prevent the establishment of the factory altogether, unlike challenges related to labor or material access that can be managed [evaluation]. Despite the potential cost increments due to labor issues, production can still proceed, highlighting the critical nature of legal considerations in location decisions [evaluation].
Overall, legal controls are identified as the most vital factor for a manufacturing business to consider when selecting a country for operations due to their capacity to impede operations directly [justification].