Business Location Factors: A Comprehensive Analysis
The location of a business is a critical decision, whether at its inception or when its current location proves unsatisfactory. As a business’s objectives and the surrounding environment evolve, the need for a new location may arise periodically.
Numerous factors influence business location, varying across different sectors. Let’s examine these factors in detail:
Factors Affecting Manufacturing Business Location
Production Methods and Location Decisions
- Small Scale: Transport and supplier location are less critical.
- Large Scale: Transport and supplier location become more important.
Market
- Proximity is essential for transporting perishable goods.
- Being near the market helps reduce transportation expenses.
Raw Materials/Components
- Proximity is crucial for transporting perishable raw materials.
- Being near raw materials reduces transportation costs.
External Economies of Scale
- The quality of nearby businesses is a significant factor.
- Consider access to equipment maintenance and worker training facilities.
Availability of Labor
- Consider the wages and skill levels of available laborers.
Government Influence
- Evaluate available grants and subsidies.
- Understand restrictions on waste disposal.
Transport and Communication
- Ensure easy product transportation.
Power
- A reliable power source is essential for effective operation.
Water Supply
- Sufficient water is needed for production, consider the cost of water.
Personal Preferences of the Owners
- Owners may prefer locations based on their origins, personal preferences, or pleasant weather conditions.
Climate
- A suitable climate can reduce heating costs or be necessary for producing certain items.
Factors Affecting Retail Business Location
Shoppers
- Assess shopper traffic and demographics.
Nearby Shops
- Consider competitors, mass markets, and potential gaps in the market.
Customer Parking
- Ensure convenient parking for customers.
Availability of Suitable Vacant Premises
- Good sites are often in short supply.
Rent/Taxes
- More popular sites are generally more expensive.
Access for Delivery Vehicles
- Ensure easy access for delivering goods.
Security
- Insecure areas may lead to theft and higher insurance costs.
Legislation
- Be aware of laws restricting trade in certain areas.
Factors Influencing Business Relocation (Domestic or International)
Insufficient Space for Expansion
- The current site may not accommodate growth.
Strategic Expansion
- Businesses may choose to expand elsewhere, considering all location factors.
Raw Material Depletion
- Importing raw materials may be necessary, especially for mining industries.
Labor Force Issues
- High wages or a lack of skilled labor may prompt relocation.
Rising Rents/Taxes
New Overseas Markets
- Relocation can cut transport costs and bypass trade barriers.
Government Grants
- Incentives to attract businesses to development areas or foreign investment.
Bypassing Trade Barriers
- Avoiding tariffs and quotas.
Factors Affecting Service Sector Business Location
Customers
- Consider whether direct contact is required.
- Assess customer convenience and timely service delivery.
- Evaluate the need for mail or internet-based services.
Personal Preference of Owners
- Proximity to their homes.
Technology
- Technology enables businesses to locate in cheaper areas, utilizing telephone, internet, and transport.
Availability of Labor
- Locate where skilled laborers reside or where laborers are willing to relocate.
Climate
- Important for tourism.
Proximity to Other Businesses
- Businesses supplying or repairing machinery need to be nearby for quick response.
- Post offices and banks benefit from busy locations near malls and shops.
Rent/Taxes
- Businesses without direct customer contact can locate in cheaper areas.