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.
- Need to be near to transport perishable goods.
- Need to be near to cut transportation expenses.
- Need to be near to transport perishable goods.
- Need to be near to cut transportation expenses.
- How good nearby businesses are.
- For maintenance of equipments.
- For training workers, etc…
- Wages of the labourers.
- How skilled they are.
- Grants/subsidies.
- Restrictions on dumping, etc…
- To be able to transport product easily.
- Need a reliable source of power to operate effectively.
- A lot of water is needed in the production process (e.g. cooling, cleaning)
- Cost of water.
- May locate in areas that:
- They come from.
- They like.
- Pleasant weather, etc…
- E.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?
- Competitors.
- Mass market.
- Gap in the market.
- Convenience for the customer.
- Goods sites (e.g. in shopping centres) are in short supply.
- The more popular the site, the more expensive.
- For delivering goods.
- If the area is insecure
- Goods will be stolen.
- Insurance will be reluctant to insure the shop.
- 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.
- 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.
- One alternative is to import raw materials from elsewhere.
- Difficulties with the labour force
- Wages are too high.
- Need skilled labour.
- Wages are too high.
- Rents/taxes rising.
- New markets open up overseas.
- Cuts transport costs.
- Bypass trade barriers.
- Cuts transport costs.
- Government grants
- To attract businesses to locate in development areas.
- To attract foreign investment.
- To attract businesses to locate in development areas.
- To bypass trade barriers
- Tariffs
- Quotas
- Tariffs
Customers
- Whether customers require:
- Direct contact.
- Is it convenient for customers to go the business?
- Will the service arrive at customers' houses in time?
- Is it convenient for customers to go the business?
- No direct contact needed.
- Mail
- Internet
- Mail
- Near their homes.
- Technology allows businesses to locate in cheaper sites.
- Telephone.
- Internet.
- Transport.
- Telephone.
- No need to be near customers.
- Need to locate to sites where skilled labourers live.
- Labourers may relocate to be near the business.
- Important for tourism.
- 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…
- If the business does not need direct contact with the customer, then it could locate in cheaper areas.
