How the government influences the work of the businesses?
Governments are one of the main reasons a business may decide to locate in one country rather than another. Where all the rest of the factors outlined are more concentrated on specific areas within a country, the government can have a great effect on the country itself in which they decide to situate. There are many protectionist policies by local governments in place to help protect trade and exports/imports in their country. These include tariffs (taxes on imports), quotas (numerical limits on imports), subsidies (money given by the government to businesses to expand when it is in their interest to do so) and red tape (a specific set of requirements that need to be met in order to export a product to that country). It is quite easy to see how these could affect where you decide to locate. For example, if your business relies heavily on being able to import cheap parts needed to assemble a computer for instance, then it is important that you locate in a country in which you can easily and cheaply acquire these parts. This will allow you to keep your USP and differentiate yourself from competitors in other countries where high tariffs may be hindering their chances of importing cheap parts as you could.
About this, trading blocs are an important part of location strategies. In the world, there are currently about nine main trading blocs/partnerships – The EU, EFTA, NAFTA, Mercosur, ASEAN, COMESA, SAFTA, Pacific Alliance and TTP. Trading blocs are ‘groups of countries in specific regions that manage and promote trade activities.’ These are sometimes referred to as a single market or free trade areas and can be a major influence in business location. In the EU there are currently 27 countries (except Britain who are in the process of leaving). This means that locating in one of these countries would allow you unprecedented access to trade freely and easily with the other countries – a very attractive factor to manufacturing businesses especially who most likely import a lot of their parts and export their products.