Location decisions

• The location of a business is usually considered either when the business is first setting up or when its present location proves unsatisfactory.
• Factors affecting the location of manufacturing businesses:

  Market- if the product perishes quickly and needs to be fresh when delivered to the market, the factory might be located near its retail outlets.

  Raw materials- raw materials may be considerably heavy and more expensive to transport. If many component suppliers are located near one another, it might be preferable to locate near these suppliers.

  Transport and communications- a nearby motorway can reduce costs by speeding up the time spent delivering the products to the market even when the market is quite a distance away.
• To some industries having a reliable source of power and therefore no regular power-cuts is important. Large supplies of water are also needed as a part of the manufacturing process.
• What are the factors affecting the location of a service business?

  Personal preference of the owner.

  Technology- some services are now conducted by telephone or via the Internet and therefore the business itself does not have to be near customers.

  Availability of labour- if a service business requires a large number of employees, then it cannot locate in remote areas. It will need to be located near a town or city.

  Near to other businesses- Services such as banks need to be near busy areas for the convenience of customers.
• What are the factors affecting the location of retailing businesses?

  Shoppers- most retailers will want a popular area. The type of shopper an area attracts will also influence the attractiveness of the area to particular types of retailers.

  Nearby shops- being able to locate near businesses which are visited regularly, will mean that a lot of people pass your shop on the way to other shops and businesses and may go in and make a purchase.

  Lack of parking may put people off visiting the area and sales will be lower.
• Locating in different countries:

  When a business sees a steady increase in its sales overseas it may decide to relocate nearer to these markets rather than transport its products from the existing manufacturing base as it may be more cost-effective.

  If the raw material source runs out, a business must either bring in alternative supplies from elsewhere or move to a new site in a country where it can more easily obtain these supplies.

  Governments may want to encourage foreign businesses to locate in their country to bring in investment and job opportunities.
• Why do governments try to influence location decisions?

  To encourage businesses to set up and expand in areas of high unemployment.

  To discourage firms from locating in overcrowded areas or in sites which are noted for their natural beauty.
• What are the measures used by a government to influence the location of firms? 


  Planning regulations will legally restrict the business activities that can be undertaken in certain areas.

  Many governments provide grants or subsidies to businesses to encourage them to locate in undeveloped parts of the country.