Malaysia is very popular location for manufacturing.
In a study of the region three key factors were identified:
Costs such as labour, land and energy.
Risks such as natural disasters, power failures and an economic.
recession were considered to be low.
Labour quality, sustainability and access to markets was considered to be very good.
Dyson moved production to Malaysia.
Labour costs were £3 per hour compared to £9 in the UK.
Also important in choosing a production location are skills and availability of labour.
Businesses cannot afford the consequences of poor quality work.
Infrastructure is also very important.
Location in a trade bloc may be a deciding factor in the choice of location.
Malaysia is a member of ASEAN. Details here.
Government incentives:
These are inducements to convince a company to choose one country over another.
This may involve:
Tax breaks.
Lower rates of company tax.
Interest free loans.
Cheap land or rent.
Lower rates on business premises.
Ease of doing business is also important.
Political stability will be considered before opening production facilities in a country.
The availability and cost of natural resources will be important for a manufacturing business.
The likely return on investment will also be considered.
The 3 quantitative techniques that you need to know are:
Payback.
ARR.
Discounted cash flow.
£ million
|
£ million
|
|
Location A
|
Location B
|
|
Initial cost
|
12.00
|
15.00
|
Annual cost savings / increased cash flow
|
||
Year 1
|
3.00
|
5.00
|
Year 2
|
3.00
|
5.00
|
Year 3
|
3.00
|
5.00
|
Year 4
|
3.00
|
5.00
|
Year 5
|
3.00
|
5.00
|
Discount table (15%)
|
|
Initial cost
|
1.00
|
Year 1
|
0.87
|
Year 2
|
0.76
|
Year 3
|
0.66
|
Year 4
|
0.57
|
Year 5
|
0.50
|
