Location of industry
The location of a business is considered when it starts-up or when its present location is unsatisfactory. The business’s objectives as well as the conditions of the environment change, so the business may need to look for a new location once in a while.
There are many factors that affect the location of businesses, and these factors are different for each business sector. We’ll take a look at them below.
Factors affecting the location of a manufacturing business
Production methods and location decisions
- Small
scale: transport and location of suppliers are less important.
- Large
scale: transport and location of suppliers are more important.
Market
- Need to be near to transport perishable
- Need to be near to cut transportation expenses.
Raw materials/components
- Need to be near to transport perishable
- Need to be near to cut transportation expenses.
External economies of scale
- How good nearby businesses are.
- For maintenance of equipments.
- For training workers, etc…
Availability of labour
- Wages of the labourers.
- How skilled they are.
Government influence
- Grants/subsidies.
- Restrictions on dumping, etc…
Transport and communication
- To be able to transport product easily.
Power
- Need a reliable source of power to operate effectively.
Water supply
- A lot of water is needed in the production process (e.g. cooling, cleaning)
- Cost of water.
Personal preferences of the owners
- May locate in areas that:
- They come from.
Climate
- They like.
- Pleasant weather, etc…
- g. to reduce heating costs in a warmer climate.
- Some climates are required to produce certain items.
Factors affecting the location of a retailing business
Shoppers
- Do shoppers go there?
- What kind of shoppers go there?
Nearby shops
- Competitors.
- Mass market.
- Gap in the market.
Customer parking available/nearby
- Convenience for the customer.
Availability of suitable vacant premises]
- Goods sites (e.g. in shopping centres) are in short supply.
Rent/taxes
- The more popular the site, the more expensive.
Access for delivery vehicles
- For delivering goods.
Security
- If the area is insecure
- Goods will be stolen.
- Insurance will be reluctant to insure the shop.
Legislation
- Laws restricting the trade of goods in certain areas.
Factors that influence a business to relocate either at home or abroad
- The present site is not large enough for expansion.
If a business simply prefers to expand elsewhere, the factors affecting location will have to be considered.
- Raw materials run out.
- One alternative is to import raw materials from elsewhere.
- Important for mining industries.
- Difficulties with the labour force
- Wages are too high.
- Need skilled labour.
- Rents/taxes rising.
- New markets open up overseas.
- Cuts transport costs.
- Bypass trade barriers.
- Government grants
- To attract businesses to locate in development areas.
- To attract foreign investment.
- To bypass trade barriers
- Tariffs
- Quotas
Factors affecting the location of a service sector business
Customers
- Whether customers require:
- Direct contact.
- Is it convenient for customers to go the business?
- Will the service arrive at customers’ houses in time?
2 . No direct contact needed.
-
- Internet
Personal preference of owners
- Near their homes.
Technology
Technology allows businesses to locate in cheaper sites.
- Telephone
- Internet
- Transport
No need to be near customers.
Availability of labour
- Need to locate to sites where skilled labourers live.
Labourers may relocate to be near the business.
Climate
- Important for tourism.
Near to other businesses
- Businesses that supply or repair machinery to others need to be near them to respond quickly.
- Post office/banks need to be in busy areas for the convenience of customers. That is, being near malls, shops, etc…
Rent/taxes
- If the business does not need direct contact with the customer, then it could locate in cheaper areas