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location decisions (factors affecting location of a manufacturing business…
location decisions
factors affecting location of a
manufacturing business
production methods
job production
, usually nearness of components will be of less importance compared to flow production (small scale)
flow production
, the location of component suppliers might be of greater importance (large number of components, costs are high)
market
locating a factory near to the market for its products used to be thought important when the product gained weight (drinks manufacturer)
product that perishes quickly and needs to be fresh, factory might be located close to its retail outlets
raw materials/components
raw materials may be considerably heavier or more expensive to transport than the finished product
e.g. it is often cheaper to process the ore near to the mining sire than to transport it elsewhere.
if the raw material needs to be processed quickly
while still fresh, locating near to the source is still important e.g. frozen vegetables or tinned fruits
there will also be a lot of waste that will not go into packaging
external economies of scale
support businesses which install and maintain equipment may be better if nearby so that they can respond quickly to breakdowns
universities have research departments and close contact will be effective
availability of labour
if particular labour skill is needed
, it may be easier and cheaper to recruit these employees if the business sets up in an area where people with the relevant skills live.
a large number of unskilled workers--an area with high unemployment
wage rate might also vary
government influence
if an area has high unemployment
, the government will give money to businesses who locate in that area.
there might be regulations in what the business can do
if the business has negative influence to surroundings
, government can refuse to allow business to set up
transport and communications
businesses usually need to be near to a transport system
a nearby motorway can reduce costs by speeding up the time spent delivering the products to market
power and water supply
to some industries, having a reliable source of power may be essential (no regular power cuts)
if large supplies of water are needed (manufacturing)
, being near to water supply is important
climate
owner's personal preference
factors affecting location of a
service sector business
customers
direct contact between the business and the customer is required
if a quick response time is needed
, business needs to be nearby
some services don't need
direct personal contact because can be through phone, post or internet
the increasing use of IT and internet, more firms are becoming free from the need to locate near customers
personal preference of the owner
technology
some services are now conducted by telephone or internet
businesses no longer need to be located close to customers
this will save on cheaper rent because location can be anywhere
availability of labour
a lot of employees--
it cannot locate in remote areas
skilled labour--
have to locate near to where this is found
it is more likely that the particular skilled labour will more near the business for work rather than vice versa
climate
tourism--
hotels will need to locate themselves where the climate is good and near to a beach
near to other businesses
some firms service equipment in big companies
they need to respond quickly to a call to repair equipment
banks need to be near busy areas for the convenience of customers
rent/taxes
if the service doesn't need to be on the main street, businesses will locate on the outskirts of the town
(lower rents and taxes)
factors affecting location of a retailing business
shoppers
most retailers will want an area which is popular
expensive goods--
needs to be in an area where people with high incomes might visit
small gift type--
area visited by tourists
nearby shops
locating near shops that are visited regularly--a lot of people will pass the shop, people will go in and might make a purchase
if business sells clothes
, being located in an area where they sell clothes might encourage people to visit since there are a lot of choices, which
increases business
if business sells clothes in an area that have no similar shops, it may not attract people since there are limited choices
customer parking available/nearby
parking is convenient and near to shops
-- will encourage shoppers to that area and
possibly increase sales
lack of parking can put people off from coming, lowering sales
availability of suitable vacant premises
if a suitable vacant shop or premises is not available for purchase or rent, the business may not be able to locate in the area that they wish
rent/taxes
the more central the site of premises, the higher the rent and taxes
retail area is popular
--high demand, renting costs will be higher
access for delivery vehicles
might be in consideration if it's difficult to gain access to premises
security
high rates of crimes may deter a business from locating in a particular area
Insurance companies may not want to insure the business
shopping areas with ore guards might be more preferable, even though it is more expensive to rent
legislation
there might be laws restricting the trading or marketing of goods in particular areas