4.4 Location Decisions Flashcards
What are the main factors that affect location?
cost
where they are allowed to locate
transport costs
infrastructure
area that their customers can easily access
competition and the potential for attracting new customers
cost of labour and availability
incentives
Explain the impact of cost on choosing a location.
Both manufacturing and services will want to minimise cost. However, generally the more popular an area is with consumers, for example a city centre, the higher the cost. Manufacturing businesses may find locations with easy access to employees or transportation links have a higher cost. If there is a shortage of space available this will also push up costs and restrict the location options open to a business.
How laws influence the location of a business?
Location may also be restricted by laws and rules that don’t allow businesses to operate in different areas, for example factories can’t locate in an area where nature is protected.
How do transport costs affect the location of a factory?
High transport costs may influence the location of a factory close to a supplier or the customers market.
Why must businesses consider infrastructure when choosing a location ?
An Amazon distribution centre may need to be located near to a motorway to allow quick delivery of products to consumers.
Many technology businesses will need access to high speed internet.
Customer service industries like coffee shops or restaurants need to locate in an area that their customers can easily access, and in a place where they like to meet and relax, like the city centre or on the beachfront.
Why must businesses consider competition when choosing a location?
popular locations may already have competitors offering similar products.
Give examples of location decisions based on availability and cost of labour.
Labour intensive manufacturers like clothing companies may need to locate where enough low cost workers live close by.
Highly skilled services like lawyers or computer programmers may need to locate where there are many highly skilled workers available like Shanghai or San Francisco.
Why do governments give incentives?
Governments may give incentives like grants or a reduction in tax to locate businesses in certain areas.
Give an example of governments giving incentives for a business.
If a manufacturing business is in a highly competitive market based on price the cost of rent and availability of employees with low labour costs may be most important.
Explain the role of legal controls on businesses.
Governments may pass laws which restrict where a business can locate.
Factories may not be allowed to locate close to where many people live because of noise pollution. Natural areas of a country may be protected from any business development.
Why are legal controls important for businesses?
Legal controls are particularly important for businesses deciding where to relocate. If a country has tough controls on how much a factory can pollute, a business may decide to locate in a country with a “lighter touch”, so avoid paying the high costs of reducing pollution.
A business may also decide to relocate in a country with a lower minimum wage and less controls on employment, so a business can reduce labour costs.
List the factors influencing relocation.
businesses may wish to relocate because of the incentive’s governments offer to Multinational Corporation
Businesses may relocate to avoid trade barriers or tariffs
For international manufacturing businesses with high transportation costs, it is more cost-effective to locate factories close to consumer markets.
For businesses with high labour costs, it is much more cost effective to locate in regions with lower wages.
As globalisation increases both competition and the choice of possible location options, businesses need to prioritise the most important factors for reducing costs and gaining competitive advantage when making a location decision.
