Key Idea: At HL, Topic 5.4 is about making location decisions using both numbers and judgement. Students must evaluate how location, outsourcing, offshoring and relocation affect cost, control, quality, staffing and long-term performance.
Core structure (memorise)
- Location decision — choosing where the business should operate
- Quantitative factors — measurable factors such as rent, wages and transport costs
- Qualitative factors — harder-to-measure factors such as image, quality of life or ethics
- Outsourcing — paying another business to carry out a task
- Offshoring — moving operations to another country
- Relocation — moving from one site to another
📍 Location factors: **Location factors —** market access, raw materials, labour, transport, infrastructure, incentives. **International location adds —** exchange rates, tariffs, political risk, culture.
🧮 vs 💭 Factors: **Quantitative —** rent, wages, transport costs, grants, tax incentives. **Qualitative —** image, ethics, manager preference, quality of life, local reputation.
🤝 Outsourcing: **Outsourcing —** another company does the task. **Can reduce costs and access expertise**. **Risk —** weaker control over quality or data.
🌏 Offshoring: **Offshoring —** operations move to another country. **Can reduce labour costs or access new markets**. **Risk —** distance, culture, exchange rates and political uncertainty.
High-yield facts examiners expect
- Businesses may use cost-benefit analysis, quantitative scoring, break-even analysis and investment appraisal to compare locations
- Relocation may reduce costs or improve market access, but can be disruptive and expensive
- Businesses must often balance lower costs against weaker control or higher risk
- Location questions in exams usually reward strong application to the case, not generic lists
- Stakeholder effects can strengthen evaluation, especially for employees, customers and local communities
HL exam tip: In recommendation questions, numbers alone are not enough. A lower-cost location is not always best if it creates quality problems, staff shortages or serious operational risk.
A strong HL answer compares both options before concluding. Examiners reward balanced judgement rather than one-sided description.
Example: A strong answer: Offshoring may reduce labour costs significantly, but the business could face weaker quality control, longer lead times and reputational risk if customers react negatively to jobs being moved abroad.
Important: Common triggers: explain location factors, compare outsourcing and offshoring, analyse relocation, evaluate two location options, or recommend the most suitable site.
- Identify whether the question is about location, outsourcing, offshoring or relocation
- Choose the most relevant factors for that business
- Explain benefits and risks
- Apply them to the case
- Use both quantitative and qualitative reasoning
- Finish with a justified judgement if the question asks for evaluation or recommendation