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4.4 Location Decisions (Factors Affecting Service Businesses (:red_cross:…
4.4 Location Decisions
1. Factors Influencing Location Decisions
Factors Affecting Manufacturing Businesses
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Production Methods
- If production is large scale, suppliers may need to be close due to transportation costs.
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Market
- If the firm produces food it may be important to locate near retail outlets as the food could perish e.g. milk.
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Raw Materials
- Heavy supplies may lead to higher transport costs e.g. ore+minerals. Should be close if supplies are processed quickly.
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External Economies of Scale
- Support businesses (repairing equipment) should be close by to respond to possible breakdowns.
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Labour Availability
- If production requires a large # of unskilled workers, an area w/ high unemployment may be be more suitable.
Wage rates in diff areas may also vary.
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Government Influence
- Grants may be offered to businesses that locate in ares w/ high unemployment.
Regulations could prevent a business from setting up in certain areas (could be harmful to environment)
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Transport + Communications
- Easy for exporting and suppliers to deliver if there's effective transport systems.
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Power+Water supply
- Important to have reliable sources of power in some industries.
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Climate
- Not as important but dry/humid climates may assist in preserving the products
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Owners' Personal Preference
Factors Affecting Service Businesses
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Customers
- Important for businesses w/ direct personal contact e.g. plumbers, hairdressers
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Owners' Personal Preference
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Technology
- If no personal contact is needed, they can take advantage of cheaper rent farther away if they use tech.
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Availability of Labour
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Climate
- Tourism businesses
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Near to other businesses
- Businesses that serve other firms (repairing)/ banks that are near busy areas.
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Rent/Taxes
- Lower rent if they don't need to be near main streets (e.g.law firms).
2. Locating in Different Countries
Factors that influence locating in a diff. country
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New Markets Overseas
- Locate to countries w/ steady sales increase
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Cheaper/New Sources of Material
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Relocate in a country easy to obtain supplies if they run out in original country e.g. oil wells
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Difficulties w/Labour Force + Wage Costs
- Especially labour intensive businesses if the country's wage costs keep rising or if special skills are needed.
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Rents/Taxes
- May move to countries where they are lower.
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Government Grants/other Incentives
- Grants/incentives may be given to foreign businesses to encourage relocation. Provides more jobs and skill development.
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Trade + Tariff Barriers
- Relocating to a country to avoid trade barriers/restrictions.
3. Role of Legal Controls
Why governments try to influence location decisions?
:red_cross: Encourage firms to set up + expand in
areas w/ high unemployment
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overcrowded areas
or places known for "natural beauty"
Methods Used to Influence
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Regulations
that legally restrict business activities in areas (e.g. residential housings, farms)
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Grants/subsides
to businesses to locate in underdeveloped areas.
Factors Affecting Retailing Businesses
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Number + Types of Shoppers
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Availability of suitable vacant shop
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Rent/Taxes
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Security
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Customer Parking nearby
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Shops nearby
- Competitors, attract shoppers, gap in the market
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Access for delivery vehicles