Topic 1.4: Decisions on location (Proximity (To market: Businesses that…
Topic 1.4: Decisions on location
To market: Businesses that make large or heavy products prefer to be closer to customers to keep transport costs down. Many service providers have to locate close to their market.
To labour: Larger companies prefer to locate in countries where labour costs are low to maximise profit. Some business prefer to locate near areas where they have access to a large pool of skilled workers.
To materials: Business that use large amounts of raw materials prefer to locate closer to the source. Some businesses need large areas of land so they locate out of town where land is cheaper.
To competitors: Service providers prefer to locate away from competitors but sometimes it's good to locate near rivals as this will ensure potential customers.
Nature of business activity
Transport and Infrastructure
They might try to locate in an area with less congestion as the traffic would prevent easy access to business site. This is an important decision for service-based businesses so they tend to locate in malls for easy access to the site.
Access to amenities and facilities
If it was a office-based business they would need to make sure there is enough access to facilities such as eateries, entertainment and hotels.
Manufacturers tend to locate close to the factories they need for production to minimise costs.
Agriculture's key consideration is land. Farms require large areas of land. Fishing industries locate near coasts
Impact of the internet:
E-commerce: Many people are switching to online shopping. This allows retailers to have more flexibility to choosing a location. They don't need a fixed premises and can run their business from anywhere there's a internet connection available. They don't need to have proximity to market. This also allows them to cater to a larger market such as global platforms.
Home-based businesses: New small businesses make use of teleworking. This allows them to work from home which decreases costs and increased convenience. The lower costs mean they are more competitive within the market.
Legal controls: Governments may try to influence location decisions
To avoid traffic congestion in overly developed areas.
To minimise the impact the business might have on the local community
To encourage businesses to locate in areas of high unemployment
To attract foreign manufacturers into the country to help create employment
A group of countries situated in the same region that join together and enjoy free trade.
Many countries use trade barriers to control the flow of goods and services imported.
To avoid these trade blocs companies may prefer to locate in one
Types of sites:
Brownfield sites: areas of land previously used and developed on
Greenfield sites: undeveloped areas usually found on the outskirts of a town
Connectivity: As the importance of electronics grows, businesses require greater network speeds and capacity to operate efficiently. Cities need to offer fast broadband in order to attract businesses.
Costs: Small business need to keep their costs as low as possible to allow them to be in the competitive market. The location that minimises these is called the least-cost site.
Large vs Small business: Small businesses might look at convenience to good local schools, housing and health services whilst large businesses need to aggressively look at cost minimisation.