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Chapter 21 - Coggle Diagram
Chapter 21
Factors that a business could consider when deciding which country to locate operations
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
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
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
Factors affecting the location of a service sector business
Customers
Technology
Availability of labour
Climate
Near other businesses
Rents and taxes
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
The role of legal controls on location decisions
Why do governments want to influence location decisions?
To encourage businesses to set up and expand in areas of high unemployment - in some countries these are called development areas
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 :
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
Government grants or subsidies
to businesses to encourage them to locate in undeveloped parts of the country