- Location is considered when:
business is first setting up
present location is unsatisfactory
business objectives change
globalization is taken into consideration
- Location decisions should be made after taking into consideration all economic, human, physical, socio-economic and strategic factors and assessing the pros and cons of each
- The main aim of choosing location is one where the cost will be low and lean production will be best achieved leading to high profits
Factors Affecting the Location of a Manufacturing/Primary Sector Business
| Production Methods | Decides importance of being close to supplier |
| Market (both the supplier and the buyer) | Depending on when the product gains weight, preservation etc. |
| Raw Materials | They aim to save cost and use lean production. This too takes into account when the product gains weight, preservation etc. |
| External Economies of Scale | Support business and education establishments should ideally be close |
| Availability of Labor | This includes quality and quantity of labor required as well as minimum wage rate. |
| Government Influence | Grants Loans Taxation Policies Restrictions |
| Best Infrastructure | Social Media (internet) Transport and Communication Reliable Power Cost and Reliability of Water Sites/land Cost of Setting-Up |
| Personal Preference | Climate, family links etc. Shareholders prefer to produce in the place where they will earn most profit |
| Climate | Economically secure Politically stable Natural temperature |
Factors Affecting the Location of a Retail/Secondary Sector Business
| Shoppers | This will be based on the type of customer one wants to attract, ideally a central location. |
| Nearby Shops/ Competition | Locate near businesses which are visited regularly which will encourage window-shopping. It is often good to locate near competition as it will attract a certain kind of demand then. Locate near places where there is a gap in the market (greenfield sites) |
| Parking | |
| Availability of Vacant Premises Near Customer | |
| Government Influences | Rent Taxes Demand & supply |
| Access for Delivery Vehicles/ Transportation | |
| Security | Crime Theft Vandalism Insurance Guards Stability Customers should feel safe/comfortable |
| Legislation | Laws restricting trading/marketing |
Factors Affecting the Location of a Service Sector/Tertiary Sector Business
| Near Customers | Direct contact and quick responses with customer is required (e.g. plumber); services which don’t require direct contact may locate further away |
| Personal Preference | |
| Technology | Online businesses allow businesses to not need to locate in areas of high demand/high rent |
| Availability of Labor | Quality/quantity of labor required |
| Climate | |
| Near Other Businesses | Support businesses must be near the businesses they are supporting so that they have a quick response time; they should locate in busy areas for the convenience of their customers (e.g. banks) |
| Rent/Taxes |
Factors Affecting the Location of an Export Business [Globalization]
| Expansion Policies/Aims | |
| Raw Materials | Close to supplier/supply as transportation cost may be high |
| Labor Force | Quality/quantity of labor required and minimum wage must be considered Outsourcing |
| Rents/Taxes | |
| New Market Opportunities | May be more cost effective to set up abroad instead of export |
| Government Aid (Grants, Subsidies, Export Zones) | They may be willing to pay for a foreign business to set up in their home country as it brings in investment, foreign exchange and job opportunities |
| Tariffs/Quotas | Free trade agreements |
Business Studies IGCSE