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Summary of Location Decisions

Businesses choose locations based on factors such as production methods, market proximity, raw materials, labor availability, and government incentives. The location impacts costs, efficiency, and market reach for manufacturing, service, and retail firms. Additionally, legal controls can encourage or discourage businesses in certain areas based on economic and environmental considerations.

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4 views4 pages

Summary of Location Decisions

Businesses choose locations based on factors such as production methods, market proximity, raw materials, labor availability, and government incentives. The location impacts costs, efficiency, and market reach for manufacturing, service, and retail firms. Additionally, legal controls can encourage or discourage businesses in certain areas based on economic and environmental considerations.

Uploaded by

chanyankei11
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Summary of Location Decisions

Why Do Businesses Choose Certain Locations?

 Businesses must select locations when starting, expanding, or relocating due to


inefficiencies.

 Location affects costs, profits, efficiency, and market reach.

Factors Affecting the Location of a Manufacturing Firm

1. Production Method

o Job production: Small-scale, location flexibility.

o Flow production: Large-scale, requires proximity to raw materials to reduce


transport costs.

2. Market

o Perishable consumer goods need factories near markets.

3. Raw Materials & Components

o Factories may need to be near raw materials, especially perishable ones (e.g.,
fruit juice production).

4. External Economies

o Being near firms that provide services (e.g., equipment maintenance) benefits
the business.

5. Availability of Labour

o Businesses locate where required skilled/unskilled workers are available.

o Firms prefer areas with low wage rates.

6. Government Influence

o Grants and incentives for setting up in underdeveloped or high-


unemployment areas.

o Restrictions in environmentally sensitive or overcrowded areas.

7. Transport & Communication Infrastructure

o Good road, rail, air, and sea links are essential for transporting goods,
especially exports.

8. Power & Water Supply


o Factories need reliable utilities for operation.

9. Climate

o Not crucial but relevant for specific industries (e.g., dry climate in Silicon
Valley for chip manufacturing).

10. Owner’s Personal Preferences

Factors Affecting the Location of a Service-Sector Firm

1. Customers

o Businesses needing direct customer interaction (e.g., restaurants, salons)


must be in accessible locations.

2. Technology

o Online services reduce the need for physical proximity to customers.

o Firms can locate where rent and wages are lower.

3. Availability of Labour

o If many workers are needed, firms set up near residential areas.

o Work-from-home reduces this factor’s importance.

4. Climate

o Important for tourism-related services.

5. Nearness to Other Businesses

o Firms serving businesses (e.g., equipment servicing) locate near them.

o Some businesses locate near competitors to attract customers.

6. Rent/Taxes

o Affordable rents and taxes influence location choices.

7. Owner’s Personal Preferences

Factors Affecting the Location of a Retailing Firm

1. Shoppers

o Shops should be in high-footfall areas like malls.

2. Nearby Shops
o Proximity to popular shops attracts more customers.

o Being near competitors helps monitor market trends.

3. Customer Parking Availability

o Convenient parking increases customer visits.

4. Availability of Suitable Premises

o Businesses need vacant premises for setup and potential expansion.

5. Rent/Taxes

o Affordable rent and tax rates matter.

6. Access to Delivery Vehicles

o Retailers with home delivery services need good transport links.

7. Security

o Shops in high-crime areas require extra security.

o Shopping complexes with security are preferable.

Why Businesses Locate in Different Countries

1. Access to New Markets

2. Availability of Cheaper or New Raw Materials

3. Lower Labour Costs or Availability of Skilled Workers

4. Lower Rent & Taxes

5. Government Grants & Incentives

6. Avoiding Trade Barriers & Tariffs

o Setting up within a country eliminates export/import tariffs and restrictions.

Legal Controls on Location Decisions

Governments influence location decisions by:

1. Encouraging Businesses in High-Unemployment & Underdeveloped Areas

o Grants and subsidies provided.

2. Discouraging Businesses in Overcrowded or Environmentally Sensitive Areas


o Planning restrictions imposed.

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