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Summary Business Location Decisions
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Business igcse (0450)Section 4 Part 21 Location Decisions
The location of a business is considered either when the
business is first setting up or when its present location is
unsatisfactory. The business environment is constantly
changing and a business’s objectives change. Business that
operate on a larger scale consider locations globally. A
manufacturing business will choose a different location to a
service business.
Factors affecting the location of a manufacturing business
If a job production is used, likely to be a small business so the
influence of the location of suppliers will be less important
If flow production is used on a large scale, location of suppliers
is important
Market
Locating a factory near to the market for its products used to be
important when the product became heavier and more
expensive to transport. Or even when transporting a perishable
good, but now this is all less important because transport links
have improved and there are ways to preserve perishable
goods
Raw materials/components
The raw materials may be considerably heavier or more
expensive to transport than the finished product. If a particular
process uses many different components, a business might
look very carefully at its location. If many of these component
suppliers are located near to one another, it might be preferable
to locate near to these suppliers.
, External economies of scale
Businesses which support the business in other ways might
need to be located nearby. Example: install and maintain
equipment. Education research departments that work with the
business on developing new product.
Availability of labour
Labour may be necessary, If particular skilled labour is needed
it is better to set up in an area where they are. Wage rates vary
dependent on the area.
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,
where the product is easier to transport to the location or port it
needs to go to
Power and water supply
Need to be in an area that has a reliable power and water
supply
Factors affecting the location of a service sector business
Customers
Locating a service sector business near its customers will be
important for certain types of services. Services where direct
contact between the business and the customer is required.
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