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NotesBusiness ManagementTopic 5.4
Unit 5 · Operations Management · Topic 5.4

IB Business Management — Location

Topic 5.4 examines the factors businesses consider when choosing a location, including proximity to markets, labour availability, infrastructure, and government incentives. Students evaluate location decisions using quantitative and qualitative methods and assess the impact of globalisation on location choices.

Exam technique guidePractice questions

Key concepts in Location

Key Idea: Where a business works, and who does the work, are two decisions. This topic is why a business picks a place, and the four ways it can reorganize production: outsourcing, offshoring, insourcing and reshoring.

Reasons for a location

  • Quantitative: rent, wages, transport, grants, expected sales.
  • Qualitative: the local workforce, links, the government, the feel of the area.
  • Station Road costs $40 a day more in rent but leaves $170 a day more.

Moving work out

  • Outsourcing: another business does the work, under contract.
  • Offshoring: the work moves to another country.
  • Lena's cleaning to Brightway; Goldcrust's biscuits to Seren.

Bringing work back

  • Insourcing: the business's own staff take the work back.
  • Reshoring: work moved abroad returns to the home country.
  • Lena's own delivery drivers; Goldcrust's croissants made at home again.

The words to know

WordMeansDo not confuse with
Outsourcing (subcontracting)paying another business to do work the business used to do itselfoffshoring, which is about the country
Offshoringmoving some or all operations to another countryoutsourcing: a business can offshore to its own factory
Insourcinghaving the business's own staff do work an outside business used to doreshoring, which is about the country
Reshoringbringing work that was moved abroad back to the home countryinsourcing
Core activitythe work the business exists to do, such as bakingnon-core work such as cleaning or payroll

Ask two questions: who does the work, and where. That names the move. Then weigh cost against control, using the case's figures, and say what it means for this business.

Exam-style question

IB-style questionExplain[4 marks]

Lena's Bakery Ltd pays two part-time cleaners $3,000 a month, wages and materials included. Brightway Cleaning offers to clean the bakehouse and the shops for $2,400 a month. Last month a food-safety inspector found flour dust behind the Mill Lane ovens. Explain one advantage and one disadvantage for Lena's Bakery Ltd of outsourcing its cleaning to Brightway.

Model answer plan

See the mark-by-mark plan — for / against / judgement, with marking guidance — in study mode.

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Important: Outsourcing and insourcing are about who does the work. Offshoring and reshoring are about where. A business can do both at once: Goldcrust paying a biscuit maker in Marovia is outsourcing and offshoring together.

Tap each card to check yourself.

Give one quantitative and one qualitative reason for a location. Quantitative: rent, wages, transport cost, a grant. Qualitative: skilled workers nearby, good links, a welcoming government.

Why pay Station Road's higher rent? It sells about 250 loaves a day to Church Street's 150, so it leaves more even after the rent.

Which work do businesses usually outsource? Non-core work: cleaning, security, payroll, IT, deliveries.

One disadvantage of offshoring? Any one: higher transport costs and slower delivery, time-zone and language gaps, jobs lost at home, harder to check quality.

Why did Lena insource her deliveries? The app's drivers delivered late and to the wrong door, and customers blamed Lena's. Her own drivers can be trained and directed.

Why might Goldcrust reshore its croissants? Marovian wages rose by a fifth, the tax holiday ended, and one tray in twenty arrives damaged after two days on a lorry.

Exam tips

  • Split location reasons into quantitative and qualitative.
  • Name the move with two questions: who does the work, and where.
  • Weigh cost savings against loss of control, quality and jobs.
  • Reshoring and insourcing reverse a move: say what went wrong with it.
  • Apply every point with a figure from the case.

What you'll learn in Topic 5.4

  • 5.4.1 Reasons for a location
  • 5.4.2 Outsourcing and offshoring
  • 5.4.3 Insourcing, reshoring and reorganizing production

Exam relevance

Business Management is assessed through Paper 1 (case study) and Paper 2 (structured questions). Expect to apply these concepts to business scenarios using appropriate tools and terminology.

Suggested study order: Read the notes for each sub-topic below → test yourself with flashcards → attempt practice questions → review exam technique.

Study resources — 5.4 Location

5.4.1

Reasons for a location

Notes
5.4.2

Outsourcing and offshoring

Notes
5.4.3

Insourcing, reshoring and reorganizing production

Notes

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Topic 5.4 Location forms a core part of Unit 5: Operations Management in IB Business Management. Mastering these concepts will strengthen your understanding of connected topics across the syllabus and prepare you for exam questions that require analysis, evaluation, and real-world application.

Frequently asked questions

What does Topic 5.4 Location cover in IB Business Management?
Topic 5.4 covers location as part of the IB BM syllabus. Students learn key business concepts, tools, and frameworks that are assessed in Paper 1 (case study) and Paper 2 (structured questions).
How should I revise Location for IB Business Management exams?
Start with the micro-topic notes to build understanding, then use flashcards for key terms and formulas. Practise applying concepts to case study scenarios and review how marks are allocated in IB mark schemes.
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