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Location of Businesses
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The notes covers Unit 4 chapter 17 of Cambridge IGCSE Business studies
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Owners need to decide a location for their firm to operate in, at the time of setting up,when it needs to expand operations, and when the current location proves unsatisfactory
for some reason. Location is important because it can affect the firm’s costs, profits,
efficiency and the market base it reaches out to.
Factors influencing location and relocation decision
There are a number of factors that determine the location and relocation decisions of
businesses.
Better infrastructure such as water, power and telecommunications as well as access to
sea, air and rail links for transporting raw materials and finished goods.
Location decisions of manufacturing and service businesses.
Businesses consider a variety of factors when choosing a location for a new business or
relocating for existing business.
The factors can be divided into two:
Quantitative factors
Qualitative factors
Quantitative factors
Cost of site
Availability and cost of labour
Transport cost
Market potential
Issues
CAMBRIDGE IGCSE BUSINESS STUDIES NOTES otienodomi@gmail.com Page 1
, Government incentives
Cost of site
Refers to how expensive the land and buildings are to rent or buy.
Availability and cost of labour
What is the average wage paid to employees in the area?
This will be influenced by the supply of employees, the skill level required and
competitors for the labour concerned.
Transport costs
How close to suppliers is the proposed site and what will be the cost of
transporting goods to and from the site?
How easy is it for customers to access or reach the location?
This is particularly important for service industries such as retail outlets, hotels,
cinemas etc.
Market potential
Revenue from sales might depend heavily on the location. E.g. restaurants, supermarkets
and other tertiary sector business will often need to close to their customers.
Clearly, it is less important for secondary sector businesses to be located so close to their
customers.
Government incentives
Both local and national governments will often provide financial and other incentives to
encourage businesses to locate in a particular area.
These incentives can significantly reduce set-up costs.
E.g. interest-free loans or grants
Qualitative factors
Size of the available of site (site of site)
Legal restrictions
Quality of local Infrastructure
Ethical issues and concerns
The size of the available site
Not only does the site need to be large enough for the current needs of the
business, but it also might be important that it offers scope for expansion in the future.
CAMBRIDGE IGCSE BUSINESS STUDIES NOTES otienodomi@gmail.com Page 2
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