The importance of location
For any company, a key business decision will be about where it is located.
►A photographic shop will want to be located where there is a sufficient number of passing shoppers to drop off their films for developing.
►As demand for internet shopping grows, companies have to find or build large warehouses near the motorway network to store the products they are selling.
►Banks and other financial institutions are moving away from city centres to out-of-t
►Many multinational companies are setting up factories in China as it has the potential to be the largest market in the world.
►Two factors in determining for the business location : power and raw materials.
Heavy industries (steel and chemicals, were often located close to sources of power, such as coal, and sources of raw materials, such as salt. Plentiful water was also often important.
Traditional factors affecting location
►Primary industries (farming and mineral extraction) still have to be located at the place of the raw material.
►Some manufacturing industries also find it cheaper to locate near to raw material.
►Coal fired power stations, chemical plants are all examples of industries where the raw materials are more expensive to transport than the final product.
►Power has become much less important in developed countries because of the availability of gas and electricity. In less developed countries without a good power system, however, it might still be an important factor.
Businesses located close to the market►Manufacturers : the final product is more bulky than the raw materials. They want to reduce transport costs by producing closer to the market.
►Component suppliers to large producers : need to be able to get their products quickly to the site of the large company after ordering.
►Service industries, like banks, retilers and legal services need to be close to where their customers live.
►‘Footloose’ businesses-often small manufacturers-prefer to be close to large markets.
Land and Labour
►Production, land and labour will be important factors in location decisions.
►Land availability will be a key factor. A business will need to consider :
-The cost of buying or renting the land in comparison with another location.
-whether there is enough space now and for potential expansion.
-if there are good access roads for supplies and finished products.
-whether planning permission is available for a business.
-the environmental impact of the location. (will the local community object if the business has waste to dispose?)
►Labour availability can also affect location. A plentiful supply of labour who will work for low wages has attracted many multinational companies to open factories in Asian countries or in the emerging Eastern European economies.
►But businesses will also be attracted to areas with labour with the right skills and motivation.
Transportation and communication links►Location close to a major port : companies that rely on imported raw materials or that export a large part of their products.
►Good transport links have become more important in their location decision.
►For a business that supply markets throughout the country : a location close to a good motorway and road link.
