Qualitative and quantitative factors in foreign manufacturing location decisions

Managament

There are two main types of factors that a manufacturing concern would have to consider in deciding on a location in which to set up in a foreign country - qualitative and quantitative. There are four main qualitative factors and three quantitative ones.

The first qualitative factor is the local infrastructure. Manufacturing facilities require significant amounts of power, and often water as well. Infrastructure needs also include institutional needs like banking and legal systems. Also included in this category is the transportation infrastructure, both in terms of getting raw materials or component parts to the facility and in terms of getting finished goods from the plant to market. The second qualitative factor is the education and skill level of the local workforce. Some manufacturing operations involve complex machinery that requires skilled workers, while other operations remain simple. The third qualitative factor are product content requirements. These are often legal requirements designed to stimulate employment by setting rules to dictate how much local material is included in a finished product, or that only products made domestically can be sold in a given market. The relative political and economic stability is the fourth qualitative factor to consider. Political instability can result in severe business disruptions.