AHP is a multinational company. It makes mobile (cell) phones in Europe in country X. 80% of its sales are in Europe. Some people are concerned about AHP's impact on the environment. The Operations Director said: 'AHP always tries to ensure it meets all legal controls. Globalisation has created many opportunities for AHP and its stakeholders. The Operations Director is planning to relocate its factories to a low-cost country in Asia. Raw materials would need to be transported an extra 4000kms. Interest rates are likely to increase across Europe.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2018). The mark or mark type is shown in brackets.

1. [2] Clear understanding: those with factories, production or service operations in more than one country OR a business with production or service operation in another country outside its normal area of operation
2. [1] Some understanding: e.g. has businesses everywhere OR worldwide
3. [1] Access to raw materials
4. [1] Obtain cheaper raw materials
5. [1] Lower labour costs
6. [1] Reduce transport costs
7. [1] Spread risk
8. [1] Remain competitive
9. [1] Avoid barrier to trade
10. [1] Access to more markets / more sales opportunities
11. [1] Access government grants / support
12. [1] Lower taxes in some countries
13. [1] Improve brand image
14. [2] Way 1: Pollution caused by disposal of mobile phones
15. [2] Way 1: Loss of green spaces from relocating its factory
16. [2] Way 1: Traffic congestion caused by transporting materials an extra 4000 km
17. [2] Way 2: Depletion of natural resources
18. [3] Way 1: Cost of borrowing increases so less incentive to buy building land for new factory
19. [3] Way 1: Consumers reduce spending as cannot afford luxury/non-essential items such as phones
20. [3] Way 2: Increased cost (of current loan/overdraft) so profits do not increase
21. [3] Way 2: Higher interest rates attract more savings
22. [3] Way 2: May have to increase prices
23. [1] Knowledge: identification of relevant issue(s)
24. [1] Application: relevant reference made to this business
25. [2] Analysis: relevant development of point(s)
26. [2] Evaluation: justified decision made as to whether AHP should relocate to a low cost country in Asia
27. Relocation: Further to reach its market as 80% of sales in Europe so may not be able to react quickly to changes in demand
28. Relocation: Availability of suitable land as will need a large area which will increase the cost
29. Relocation: Availability of suitable labour to make the phones
30. Relocation: Distance to raw materials which is an extra 4000 km which could lead to delays in production
31. Relocation: Negative reaction of local community as there are environmental concerns
32. Relocation: Legal controls may restrict or encourage where it can locate