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Questions and Answers

Why might a business choose to keep its design or head office in the UK even if it moves production to a country with lower labor costs?

The UK may offer advantages in design, innovation, or access to specific expertise, even if production costs are higher.

A country has a high unemployment rate and businesses are looking to expand production. How can the government make this country more attractive for businesses?

The government can invest in training programs to improve the skills of the unemployed, making them more attractive to businesses and reducing the need for businesses to hire skilled workers from other countries.

Explain how a country's 'comparative advantage' can influence the types of products it exports, using an example.

Comparative advantage arises from a country's unique factors like skills, resources, or traditions, leading to specialized production and exports; for example, Canada exports maple syrup due to its historical expertise and abundant maple trees.

How does the UK's high national minimum wage affect its attractiveness as a location for manufacturing compared to countries with lower wages?

<p>It increases production costs, making the UK less attractive for manufacturing compared to countries with lower wages, as labor costs form a significant part of overall expenses.</p> Signup and view all the answers

What is one potential drawback for a business that chooses a country with very low labor costs but a less-skilled workforce?

<p>The business might face challenges in maintaining product quality, innovation, and efficiency, potentially requiring additional investment in training and quality control measures.</p> Signup and view all the answers

Flashcards

High UK Production Costs

Producing goods is more expensive in the UK compared to some other countries.

Offshoring

Moving production to another country while keeping design/HQ functions in the original country.

Comparative Advantage

The idea that some countries can produce certain goods more efficiently or effectively than others.

Labor Force Availability

The availability of workers seeking employment.

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Differentiation Strategy

A business strategy focused on offering unique or superior products, often requiring highly skilled staff.

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Study Notes

Costs of production are higher in the UK compared to other countries

UK Production Costs

Producing goods in the UK is generally expensive
Many raw materials like Cocoa must be imported
The UK has a high standard of living and a high national minimum wage
Businesses may move production to countries with lower costs but keep design/head offices in the UK

Production Costs and Wages

The main cost of production is often employee wages
Countries with lower wages are more attractive as production locations

Comparative Advantage

Comparative advantage is the idea that some countries are better at producing certain products
This advantage can be due to skills, availability of raw materials
Canada exports maple syrup to the USA due to its history and tradition in maple syrup production, giving it a comparative edge

Labour Force Availability

UK unemployment is low compared to other countries at 3.9%
A large unemployed population means more candidates for positions
Differentiation strategies may require more skilled staff than low-cost strategies
Mexico gets lowest production score due to very low average wages

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Description

Producing goods in the UK is expensive due to imported materials and high wages. Comparative advantage explains why countries like Canada specialize in products like maple syrup. The UK's low unemployment rate also impacts production costs.