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.
📍 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.
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