An electronics firm is considering how best to sup - ply the world market for microprocessors used in consumer and industrial electronic products. A manufacturing plant costs about $500 million to construct and requires a highly skilled workforce. The total value of the world market for this product over the next 10 years is estimated to be between $10 billion and $15 billion. The tariffs prevailing in this industry are currently low. What kind of location (s) should the firm favor for its plant (s) ?

Question

Business

Nigel Pierce

27 April, 18:18

An electronics firm is considering how best to sup - ply the world market for microprocessors used in consumer and industrial electronic products. A manufacturing plant costs about $500 million to construct and requires a highly skilled workforce. The total value of the world market for this product over the next 10 years is estimated to be between $10 billion and $15 billion. The tariffs prevailing in this industry are currently low. What kind of location (s) should the firm favor for its plant (s) ?

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Eliza Luna · Answer 1

The electronic firm should look for locations where a skilled workforce is relatively cheap (in comparison with other countries) and where access to raw material is easy to get (easiness is understood as low transport cost and high availability).

Explanation:

Assuming country regulatory laws are the same in every country, international trade barriers are low, and the quality of productive factors are the same everywhere, the decision will depend on the relative cost of productive factors and the capacity of getting them. That is why the best location will be those that offer the lowest cost per unit, and easy access to those resources