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Main factors influencing location decisions - Coggle Diagram
Main factors influencing location decisions
Factors affecting location decisions
Manufacturing businesses
Production methods
This might be more important with flow production and JIT production compared to with job production
Market
If the product is heavy, transport might become expensive
Raw materials
Locate near a supplier that supplies perishable materials like milk or heavy components like rocks
External economies of scale
Firms that support the business would have to be nearby
If machinery breaks in such a way, it would be easier to repair
Availability of labour
To manufacture products, some labour would be necessary
If skilled labour in particular is needed, you may need to locate near an area relevant to skilled workers
Government influence
When a government wants to encourage businesses to locate in specific places, giving the business grants of subsidies would likely be their solution to doing so
Transport and communications
Businesses would usually need to be close to transportation in order to export their products
Power and water supply
Locating the business near a reliable source of power is important, especially if the business uses machines
Climate
Is not usually a big influence unless specific products may be damaged due to dry weather or rain
Service businesses
Customers
Locating near customers would be very important so that the customer would not have to travel too far away
However, some services may not need to be nearby customers if they rely on digital means
Personal preference
Business owners could choose as they please
Technology
This has allowed some services to locate away from customers
Availability of labour
If a service business requires large numbers of workers, they should locate near a large town or city
Climate
This would affect some businesses
Hotels often have to locate in places where there is good climate
Proximity to other businesses
Some services may need businesses to supply them with equipment or for repairs with said equipment
Rent/taxes
If the service isn't high in demand, it doesn't have to locate in a main street or city centre
Legal controls on decisions
Why do governments do this?
To encourage businesses to set up or expand in high unemployment areas
To discourage firms from building on overcrowded areas or conservatory sites
There are two ways a government does this
Planning regulations
This restricts business activities that can be done in other places
Government grants or subsidies
These help encourage firms to locate in underdeveloped areas
That would be done in order to open up more job opportunities
Factors affecting country decisions
Multinational companies have businesses in many countries
This could increase international trade and improve global communication and transport
New market overseas
When a business sees a steady increase in sales overseas, it may decide to relocate in these markets to expand even more
Successful businesses may choose to expand their business to these other markets or relocate entirely
Cheaper or new sources of material
If raw material runs out or if international materials are cheaper, a business may instead choose to relocate there
Difficulties with labour force
If a company is located in a country where wages are increasing, the business may want to locate in a country where the wage laws are lower and more lenient
Rent/tax considerations
If the company is located in a country where taxes are increasing, they may consider moving to another country where taxes are low
Availability of government grants
Governments may encourage foreign businesses to locate into the country using grants of subsidies in order to improve their economy and provide more job opportunities for their people
Trade and tariff barriers
If there are trade barriers like tariffs or quotas, locating in that country could circumvent that