4.4: Location Decisions Notes:

Why Location Matters

• Businesses relocate or choose new sites due to growth, cost changes, market access, or operational needs.

Factors Affecting Location of Manufacturing Businesses

1. Production Method

• Job production → small scale → location less dependent on suppliers.

• Flow production → large scale → needs reliable supply of components.

2. Market

• Perishable goods may need to be near customers.

• Improved transport reduces importance of proximity.

3. Raw Materials / Components

• Heavy/expensive-to-transport materials → locate near source.

• Fresh materials (fruit, vegetables) → must be processed quickly.

4. External Economies of Scale

• Being near suppliers, maintenance firms, research centers.

5. Labor Availability

• Skilled labor → locate where skills exist.

• Unskilled labor → areas with high unemployment.

6. Government Influence

• Grants encourage firms to locate in certain areas.

• Regulations may restrict harmful industries.

7. Transport & Communications

• Access to roads, ports, airports reduces costs.

8. Power & Water Supply

• Essential for industries with high usage.

9. Climate

• Rarely important except for specific industries (e.g., silicon chips).

Factors Affecting Location of Service Sector Businesses

1. Customers

• Services needing direct contact (hairdressers, cafés) must be near customers.

• Online/phone services can locate anywhere.

2. Owner Preferences

• Small service firms often locate near where owners live.

3. Technology

• IT allows remote service delivery.

4. Labor Availability

• Large service firms need access to large labor pools.

5. Climate

• Important for tourism-related services.

6. Near Other Businesses

• Banks, repair services, and B2B services benefit from proximity.

7. Rent/Taxes

• Lower rent areas attract services not needing central locations.

Factors Affecting Location of Retail Businesses

Key factors

1. Number/type of shoppers.

2. Nearby shops (complementary or competitive).

3. Parking availability.

4. Suitable premises.

5. Rent/taxes.

6. Delivery access.

7. Security.

8. Local laws.

Factors Affecting Which Country to Locate In

1. New Markets Overseas

• Move closer to growing markets to reduce transport costs.

2. Cheaper/New Materials

Locate where raw materials are available or cheaper.

3. Labor Costs & Skills

• Labor-intensive firms move to low-wage countries.

• Skill-intensive firms move where skilled labour exists.

4. Rents/Taxes

• Lower costs attract relocation.

5. Government Incentives

• Grants, tax reductions, subsidies.

6. Trade Barriers

• Locating inside a country avoids tariffs/quotas.

Legal Controls on Location

Governments influence location to:

• Encourage firms to set up in high-unemployment areas.

• Prevent firms from locating in overcrowded or environmentally sensitive areas.

Tools used

• Planning regulations (restricting certain activities).

• Grants/subsidies to attract firms.

NOTES DONE BY FARIDA SABET

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