Business Location Decisions Flashcards
What are the 11 factors of business location decisions?
Labour regulations Crime Climate Environment Transport Infrastructure Potential markets (customers) Raw materials Labour markets Government and local regulations and taxes Competition
Name 3 important labour regulations acts?
- The Labour Relations Act
- The Basic Conditions of Employment Act
- The Employment Equity Act
How will the labour regulations affect a business location?
- cost of employing and training workers is cheaper in some countries than others
-owner needs to think about trade union activities in specific areas
–if a trade union in a specific place is known for protesting and taking industrial actions in support of a political issue that the owner cannot control
It will discourage a business from starting there
How does the environment impact determine a business location?
- if the business is likely to cause pollution or environmental damage the authorities can prevent it all together
- can insist that a detailed environmental impact assessment be done before a decision is taken
- businesses with low environmental impact must think about access to the building, parking and possible risk to pedestrians.
What are 3 common environmental problems caused by businesses?
Air or water pollution
Noise pollution
Toxic waste
Where should businesses that cause air or water pollution locate?
- Factories
- away from residential and agricultural areas
- to minimize the effect on people, livestock and crops in the area
Where should a business that causes noise pollution be located?
Saw mills , panel beaters, night clubs
- not in a residential area
What are the implications of toxic waste?
- factory must follow the dumping regulations
- must process the waste products so they are non toxic
- add to the financial cost of production
- choose to locate it closer to controlled dump sites
- locate it in a country where the regulations are less strict
When thinking of transport what are the 4 things that you should keep in mind?
- Transport of goods from suppliers
- Transport of goods to retail outlets or direct to consumers
- Transport for customers to and from the business if it is a service business
- Transport for the staff to and from work
What types of transport are there?
Rail, road, air ,water, pipeline transport
The mode you choose depends on your type of goods or services.
How does transport affect your business location decision?
- must be reliable and cost effective (fuel, toll road fees, vehicle maintenance)
- business must be close to other suppliers and customers
- large volumes if products should be transported by ship, rail or air
- cost of storage must be taken into account
- transport for employees
- type of business I.e fresh fruit business close to transport source
Why must the owner consider the employees when they are thinking about transport?
- reliable, safe and affordable
- if it’s not employees will struggle to get to work
- there could be high levels of absenteeism
- low productivity levels
- if the business has lots of staff they should locate closer to the workers homes or an affordable source of transport ( bus , train etc)
What is infrastructure?
All the basic facilities that a business needs in order to operate.
Physical infrastructure- ‘ roads , access to running water, electricity, cellular networks, wifi, railway lines , equipment, harbors, airports etc
I.e business that receives goods by train will locate close to the train station
How does infrastructure influence your location?
You have to look at the infrastructure you need in order to place your business. I.e business that need lots of electricity and water should locate close to these sources
- where they are readily available, affordable and reliable
- infrastructure can also be financial and telecommunications services for a business (banking, insurance, internet providers)
What is a business’s potential market?
The customers : The demand for its products or services
Before starting what should an entrepreneur find out? (Potential market )
- is there a demand for products and services in a specific area
- what does the future demand look like
How does the potential market affect your business?
- it is more important for a trading business than a manufacturing business to be closer to its potential market
- most businesses in the tertiary escort that sell goods or services directly to the customer must be close to their potential market
- convenience stores, hairdressers, supermarkets
- must look at the target market (age,gender, cultural group)
How do raw material affect a business location decision?
- transport , storage and specialized technology increases the cost of raw materials
- manufacturer must keep the raw materials cost down to gain a higher profit
- if a business requires lots of raw materials then then it should be as close to its main source as possible
What should a business take into account concerning raw materials?
- if the transport costs are high
- the raw materials are big and heavy or difficult to transport
- if the rise materials are perishable and need to be refrigerated
Entrepreneurs who want to set up a business should consider? ( labour markets )
How many workers will the business need?
What type of workers will the business need?
How do labour markets affect your business location?
- labour intensive businesses ( businesses with lots of employees) need to be close to and urban area with a large population
- businesses that are mechanized or offer skilled services (doctors , lawyers etc) need fewer workers
Finding skilled and unskilled labour (labour markets)
- Businesses that need skilled laborers should locate close to a labour market where these types of people live.usually urban areas.
- You can attract skilled workers by offering accommodation or other financial and lifestyle incentives if your business is not in a city.
- specialized workers can demand higher pay rates
- easy to find unskilled laborers because so many purple are looking for jobs
- very few jobs require unskilled laborers so they might have to be trained anyway
How does climate affect your business location?
- some businesses must locate in an area with a specific climate because the nature or their activities are dependent on it
- farming crops and life stock depend on climate
- tourism depends on climate
- processing and manufacturing businesses should locate close to the supply in order to escape high transport or refrigeration costs
- extreme weather conditions can greatly lower productivity
How does a government, taxes and local regulations and taxes impact your business?
- should try and locate where the costs are as low as possible to maximize profits
- have to pay rates,taxes and municipal services
- some municipalities and governments encourage businesses in specific industries to locate in specific areas
- they do this by charging lower rates for municipal services and taxes etc
- if a municipality needs to attract business badly you should carefully consider because it could have negative draw backs and factors that have discouraged other businesses from locating there
What is competition?
Any other businesses that offer the same or similar types of products or services to the same or potential future market
Must consider present and future competition when locating their business
How does competition affect a business location?
- if there is too much competition in one area a new business may not be able to survive because they will have to compete with an already established business and the demand for the product might not be high enough.
- should have unique products so it can attract new customers and keep its target market
How can competition be an advantage?
- help create a market for each other because customers know where To go
- a certain Area can become well known for providing a wide range of a particular type of business and product
How does crime influence your business location?
You need to consider the security risk and cost. The business has to be able to pay for security for their staff, property and customers. Have to pay insurance premiums. Have to pay for alarm systems and security guards.
People need to feel safe at your business , so you need to locate in an area with a low crime rate to reduce risk.
