Chap 21 Location Decisions:
Location decision refers to decisions taken by a business when choosing a location for its
establishment however it varies on which type of business is being set up.
Factors affecting the location of a manufacturing business:
Market:
In the past, factories were placed near markets because heavier products cost more to
transport And perishable goods like milk needed to be transported quickly.Today, improved
transport means being close to markets matters less, even for heavier items and perishable
goods.
But it is still more efficient and cost effective when located near suppliers.
Availability of labour:
Labor availability is important for manufacturing products efficiently. Areas with a large
number of skilled workers with low wages and stable economies are preferred
Transport and communication:
Businesses can benefit from being close to transportation hubs like ports, roads, railways,
and airports this reduces shipping costs and speeds up delivery.
Power and water supply:
Industries need reliable power and water. While electricity is usually available, some
industries require steady power to avoid disruptions. Similarly, water supply is vital,
especially for tasks like cooling in power plants. Being close to a river or the sea, can be
helpful for these industries.
Climate:
Climate generally doesn't affect most manufacturing, but sometimes it matters. For example,
Silicon Valley's dry weather helps make silicon chips
Factors affecting the location of a service sector business:
Customers:
Having customers near by is very important in service sector business as direct contact
between customers and the business is required
Technology:
Thanks to technology, some services, like website design, can be done from anywhere. This
means businesses don't have to be near their customers. They can choose cheaper
locations.It also makes communication easier with customers.
Availability of labour:
Labor availability is important for providing services efficiently. Areas with a large number of
skilled workers with low wages are preferred.
Rent and taxes:
If a service, like a doctor's office or a law firm, doesn't need to be in the city center, they
might choose to set up on the outskirts to save money on rent and taxes.
Factors that a business could consider when deciding in which country to
locate operations:
Near by new markets:
When a business sells more overseas, it might move its operations closer to those markets to
save on costs.
Cheaper or new sources of materials:
If a business runs out of raw materials, it has to either find new sources elsewhere or move to
a country where it can get those materials easily , it's also cheaper to use materials right
where they're found instead of shipping them to another country
Availability of labour:
Labor availability is important for manufacturing products efficiently. Countries with a large
number of skilled workers with low wages and stable economies are preferred but
sometimes it could be difficult.
Rent and taxes considerations:
If other costs such as rent or taxes keep increasing this might cause the business to relocate
to countries where these rents or taxes are lower.
Grant and Government influence:
In the three cases above factor of grant and government influence is very important for
example:
1. A manufacturing business is deciding to set up in a well populated industrial area
however government might intervene and offer grants to set up the business in a area
with high unemployment it might be a win for both as the government is successful in
providing jobs and the business is getting grants and also might get low wages cost.
2. A service business like a doctor clinic might get grants from government to move to a
place with poor medical conditions for the well-fare of the people living there.
3. A retailing business might get grants from the government to move from an urban area
to a rural area for the development of that area and to make people’s life easier.
4. The government of an other country might provide grants to successful business of a
country to move to their country for better economy.
