Which of the following is one of the most typical reasons for locating value-chain activities abroad?

• A. To limit access to global markets
• B. To avoid international trade altogether
• C. To reduce the quality of goods produced
• D. To take advantage of lower production costs

Answer: (D)

Verified step by step guidance

1. Understand the concept of a value chain, which refers to the full range of activities that firms engage in to bring a product from conception to delivery, including design, production, marketing, and distribution.
2. Recognize that firms often locate parts of their value chain abroad to optimize costs and efficiency, especially when certain countries offer advantages such as cheaper labor, raw materials, or favorable regulations.
3. Evaluate the options given: limiting access to global markets or avoiding international trade contradicts the purpose of expanding value chains internationally, and reducing quality is generally not a goal for firms aiming to compete effectively.
4. Identify that the most typical reason for locating value-chain activities abroad is to take advantage of lower production costs, which can improve competitiveness and profitability.
5. Conclude that the correct answer aligns with economic incentives for firms to minimize costs while maintaining or improving product quality and market reach.