• 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 MethodsDecides importance of being close to supplier

(both the supplier and the buyer)

Depending on when the product gains weight, preservation etc.
Raw MaterialsThey aim to save cost and use lean production. This too takes into account when the product gains weight, preservation etc.
External Economies of ScaleSupport business and education establishments should ideally be close
Availability of LaborThis includes quality and quantity of labor required as well as minimum wage rate.
Government InfluenceGrants





Best InfrastructureSocial Media (internet)

Transport and Communication

Reliable Power

Cost and Reliability of Water


Cost of Setting-Up

Personal PreferenceClimate, family links etc. Shareholders prefer to produce in the place where they will earn most profit
ClimateEconomically secure

Politically stable

Natural temperature


Factors Affecting the Location of a Retail/Secondary Sector Business

ShoppersThis will be based on the type of customer one wants to attract, ideally a central location.
Nearby Shops/ CompetitionLocate 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)
Availability of Vacant Premises Near Customer
Government InfluencesRent


Demand & supply

Access for Delivery Vehicles/ Transportation






Customers should feel safe/comfortable

LegislationLaws restricting trading/marketing


Factors Affecting the Location of a Service Sector/Tertiary Sector Business

Near CustomersDirect contact and quick responses with customer is required (e.g. plumber); services which don’t require direct contact may locate further away
Personal Preference 
TechnologyOnline businesses allow businesses to not need to locate in areas of high demand/high rent
Availability of LaborQuality/quantity of labor required
Near Other BusinessesSupport 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)


Factors Affecting the Location of an Export Business [Globalization]

Expansion Policies/Aims
Raw MaterialsClose to supplier/supply as transportation cost may be high
Labor ForceQuality/quantity of labor required and minimum wage must be considered


New Market OpportunitiesMay 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/QuotasFree trade agreements


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