Key Idea: In 5.4, IB wants you to understand how businesses choose locations, the difference between outsourcing and offshoring, and how location options are evaluated. This topic is about choosing where operations should happen and whether another business or country should be used.
🤝 Outsourcing: **Outsourcing —** another company does the task. **Used for —** reducing costs or gaining specialist expertise. **Risk —** less control over quality.
🌍 Offshoring: **Offshoring —** operations move to another country. **Used for —** lower labour costs or new markets. **Risk —** distance, culture and political issues.
🧮 Measurable factors: **Quantitative —** rent. **Quantitative —** wages. **Quantitative —** transport costs. **Quantitative —** grants and tax incentives.
💭 Judgement factors: **Qualitative —** image of the location. **Qualitative —** quality of life. **Qualitative —** environmental concerns. **Qualitative —** manager preference.
In location questions, generic points are not enough — you must explain why a specific factor matters for that specific business.
In recommendation questions, use both numbers and judgement. A location with lower cost is not always best if it harms quality, access or staffing.
Example: A strong answer: Offshoring may reduce labour costs significantly, but the business could face communication problems, weaker quality control and reputational risk if customers react badly to jobs being moved abroad.
Important: Common triggers: explain location factors, distinguish outsourcing and offshoring, analyse relocation, compare two sites, recommend the best location option.
- Identify whether the question is about location, outsourcing, offshoring or relocation
- Choose the most relevant factors for that business
- Explain the benefit and risk
- Apply it to the case study
- Give a justified conclusion if it is a recommendation question