Location decisions

• Location


  The site from which a business decides to operate
• Location Decisions


  1. Business may look for a new location

  2. Existing location no longer meets its needs

  3. New site becomes available that is more attractive to the business
• Businesses may look to locate sites in their home country or abroad
• Large companies that have chosen to locate their factories where labour and material costs are low

  • Apple
  • Nike
• Irrespective of the size of the business, a good location can reduce costs and increase profits, whereas a poor location will cease the business
• A good location provides excellent access to sufficient customers, whereas a poor location limits customer interactions
• A good location provides access to a skilled workforce, whereas a poor location limits access to the required human skills
• Proximity to key suppliers

  Businesses that need to process fresh raw materials may locate close to the source, and those that adopt lean production techniques may locate close to key suppliers to reduce lead times
• Proximity to main customers

  Businesses selling perishable goods may locate close to the target market, and manufacturers of heavy or difficult-to-transport goods may locate close to their end market to reduce transportation costs
• Availability of workers


  Businesses that require skilled labour choose locations where workers with those skills are readily available, and hi-tech businesses may locate in areas where competitors operate to take advantage of the concentration of skilled workers
• Financial incentives


  Governments sometimes provide grants or low-cost loans to firms that set up in areas with high-unemployment, and low business rates may encourage manufacturers to expand in particular regions
• Transport links


  Good transport links provided by major roads and efficient rail links are particularly important for businesses that require an effective logistics network
• Power/water supply


  A reliable and steady supply of water and power are required by factories
• Trade barriers


  A business located in a market within a trade bloc will be able to access many advantages, such as reduced protectionist measures
• Financial incentives


  Governments may offer incentives (e.g. grants, business loans and tax breaks) to locate in their country as MNCs bring in investment, foreign currency and job opportunities
• Access to cheaper or skilled labour


  Businesses may choose to locate production in a market where labour costs are lower or where significant numbers of workers have specialist skills
• Lower taxation


  Some countries tax businesses and their employees at very low rates
• Alternative sources of raw materials

  Some countries have cheaper raw materials or are sources of rare raw materials that are used in the production process
• Access to new markets

  Many businesses choose to locate near to customers in another country to reduce transport and distribution costs
• Laws


  Rules created by the government of a country with the aim of regulating the actions of its citizens and businesses
• Regulation


  The process of enforcing the laws that have been created and ensuring that businesses abide by them
• Less economically developed countries

  Often have fewer laws and less enforcement of their existing laws, which is likely to be attractive to some businesses as they enjoy lower costs and fewer legal requirements
• More economically developed countries

  Can be attractive to businesses who desire to locate in a region with good infrastructure, highly-skilled workers, and high standards of living
• Measures used by Local Government to influence Location Decisions

  • Planning regulations
  • Government grants or subsidies
• Planning regulations


  Regulations that limit the operations of businesses in certain locations, such as restricting opening hours, requiring planning permission, and regulating the appearance of new buildings
• Government grants or subsidies


  Grants and subsidies that encourage businesses to set up and expand in areas of high unemployment, underdeveloped regions, or those that have suffered from industrial decline