Chapter 21

Location of industry - The geographical location of a business is usually considered either when the business is first setting up.

Factors affecting the location of a manufacturing business

Market - Locating a factory near to the market for its products used to be thought important when the product gained weight. However, because transport links are much improved, being near to markets have become less of an importance

Raw materials/components - The raw materials may be considerably heavier or more expensive to transport than the finished product, therefore manufacturers might want to base their factory nearby to those resources

Availability of labour - If particular skilled labour is needed, it may be easier and cheaper to recruit these employees in an area where people with relevant skills live

Government influence - When a government wants to encourage businesses to locate in a particular area it will offer state-funded grants to encourage firms to move there

Factors affecting the location of a service sector business

Transport and communications - Businesses usually need to be near to a transport system

Power and water supply - Today electricity is available in most places and therefore the availability of power is not so important, but to some industries, having a reliable source of power and therefore no power cuts may be essential

Climate - This will not influence most manufacturing businesses but occasionally it may be important. Silicon Valley has a very dry climate which aids to the production of silicon chips

Customers

Technology

Availability of labour

Climate

Near other businesses

Rents and taxes

Factors that a business could consider when deciding which country to locate operations

Factors affecting location of a retailing business

Shoppers - Want an area which is popular

Nearby shops

Customer parking

Availability of suitable vacent premises

Rent/taxes

Access for delivery vehicles

Security

Legislation

New markets overseas - If business sees a steady increase in its sales overseas then it may decide to relocate nearer to those markets rather than transport its goods there

Cheaper or new sources of materials

Difficulties with the labour force and wage costs

Rents/taxes considerations

Availability of government grants and other incentives

Trade and tariff barriers

The role of legal controls on location decisions

Why do governments want to influence location decisions?

  1. To encourage businesses to set up and expand in areas of high unemployment - in some countries these are called development areas
  2. To discourage firms from locating in overcrowded areas or on sites which are noted for their natural beauty

Two types of measures are often used by governments to influence where firms locate :

  1. Planning regulations legally restrict the business activities that can be undertaken in certain areas. For example, a business planning to open a factory in an area of residential housing might be refused planning permission
  2. Government grants or subsidies to businesses to encourage them to locate in undeveloped parts of the country