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CostThere are two components of costs, which is tangible and intangible cost. Tangible costs refer to costs which can be measured, and are costs such as utilities, labor, and taxes. Intangible costs, on the other hand, are costs that cannot be quantified, such as quality of education, and the community’s attitude towards the company and the industry (Heizer, Render, & Munson, 2017, pp. 342). Companies may take advantage of countries where the cost of operations is significantly lower, such as in Cambodia or China. Lowered operational costs will increase the profits of the companies, thus giving them a competitive advantage as compared to companies who are operating in first-world countries. However, it may affect their intangible costs, as the workers are may not be skilled to perform intricate work due to their quality of education. Also, consumers may also avoid purchasing products which are produced from certain countries due to their notorious reputation of infringing environmental or human rights such as causing pollution or using child labor.Political risk, values, and culture3
LOCATION DECISIONSEvery country is subjected to its own political risks, values, and culture, which may also affect a company’s decision to relocate. Being in a country with low political risk will ensure the stability of the company economically. Also, a good country to relocate to must also have stable employment, as well as low absenteeism and turnover rates, as it will maintain the production level for the company. On the other hand, relocating to a country with high political risk such as North Koreawill affect the company in terms of stability, as no one knows what will happen when the country decided to go into war with another country. Also, having stable employment will ensure that the company will be able hire workers, especially skilled workers, easily. High absenteeism and turnover rates will affect the operation and production of the company as there will be less workers performing the same amount of work.Proximity to marketsProximity to markets is also another critical factor to consider as it determines how fast the products will reach their customers, as well as how much will the shipping of products to their customers cost. Being near their markets will ensure that their products can reach their customers faster, thus increasing customers’ satisfaction and being the leader in the “time-based competition” (Demeter, 2013). It will also be cheaper as there may be other modes of transportation, such as by trucking or by rail, that the company can consider to bring down the cost.However, being near customers may not make sense if it does not bring down the costof operations. If the company wants to be in proximity to markets, it must be able to find a location where the cost of operations is justified, and does not cost more than being in its original location.