Chpt.20 Location decisions

Question 1

define ‘External economies of scale’ [1]

Answer 1

External economies of scale are cost benefits to a business resulting from locating in a region with other businesses or organisations operating in the same industry

Question 2

define ‘Infrastructure’ [1]

Answer 2

The basic physical and organisation of a facility (roads, buildings, power supply)

Question 3

Factors that affect the locating decisions of a manufacturing firm [9]

Answer 3

Production method, Market, Raw materials/components, external economies, availability of labour, government influence, transport & communication infrastructure, power and water supply, climate

Question 4

How does production method affect manufacturing firms location decisions? [2]

Answer 4

When job production is use, the business will operate on a small scale, so the nearness to components/raw materials won’t be that important. For flow production, on the other hand, production will be on a large scale - there will be a huge amount of components and transport costs will be high - so components need to be close by

Question 5

How does the market affect manufacturing firms location decisions? [2]

Answer 5

If the product is a consumer good and perishable, the factories need to be close to the markets to sell out quickly before it perishes

Question 6

How do raw materials/components affect the location of a manufacturing firm? [2]

Answer 6

The factories may need to be located close to where raw materials can be acquired, especially if the raw material is to be processed while still fresh, like fruits for fruit juice.

Question 7

How do external economies affect the location decision of a manufacturing firm? [2]

Answer 7

The business may be located near other firms that support the business by providing services (e.g. business that install and maintain factory equipment)

Question 8

how does the availability of labour affect he location decisions of manufacturing firms? [2]

Answer 8

Businesses will need to locate near areas where they can get workers of the skills they need in the factory. If lots of unskilled workers are needed in the factories firms locate in areas of high unemployment. Wage rates also vary by location and firms will want to set up in locations where wage rates are low.

Question 9

How does government influence affect the location decisions of manufacturing firms? [2]

Answer 9

the government sometimes gives incentives and grants to firms that set up in low-development, rural and high-unemployment areas. There may also be govt. rules and restrictions in setting up, e.g.: in some areas of great natural beauty. business needs to consider these.

Question 10

How does transport and communication infrastructure affect the location decisions of manufacturing firms. [2]

Answer 10

the factories need to be located near areas where there are good road/rail/port/air transport systems. If goods are to be exported, it needs to be set up near ports.

Question 11

How does power and water supply affect the location decisions of a manufacturing firm? [2]

Answer 11

factories need water and power to operate and a reliable and steady supply of both should be ensured by setting up in areas where they are available.

Question 12

how does climate affect the location decisions of a manufacturing firms? [2]

Answer 12

not the most important factor but can influence certain sectors. Eg: the dry climate in Silicon Valley aids the manufacturing of silicon chips.

Question 13

What factors that affect the location decisions of a service-sector firm [6]

Answer 13

Customers, technology, availability of labour, climate, nearness to other business, rent/taxes

Question 14

how do customers affect the location decisions of a service-sector firm? [2]

Answer 14

service-sector businesses that have direct contact with customers need to locate in customer-accessible and convenient places. (E.g. restaurants, hairdressers, post offices etc.)

Question 15

how does technology affect the location decisions of a service-sector firm? [2]

Answer 15

today, with increasing use of IT to shop and make payments, customers do not need direct access to services and proximity to the market/customer is not a very important factor in location decisions. They locate away from customers in places where there are low rent and wage rates. Eg: banks

Question 16

how does the availability of labour affect the location decisions of a service-sector firm? [2]

Answer 16

if large number of workers are required in the firm, then it will need to locate close to residential areas. If they want certain types of worker skills, they will need to locate in places where such skilled workers can be found. However, with work-from-home and technology, this is not that big of a factor nowadays

Question 17

how does climate affect the location decision of a service-sector firm? [2]

Answer 17

tourism services need to be located in places of good climate.

Question 18

how does the nearness to other business’ affect the location decisions of a service-sector firm [2]

Answer 18

some services serve the needs of large companies, such as firm equipment servicing and so they need to be very close to such businesses. Businesses may also set up where close competitors are to watch them and snatch away their customers.

Question 19

what factors affect the location decisions of a retailing firm? [7]

Answer 19

Shoppers, Nearby shops, customer parking availability, availability of suitable vacant premises, rent/taxes, access to delivery vehicles, security

Question 20

How do shoppers affect the location decisions of a retailing firm? [2]

Answer 20

retailers need to be located in areas where shoppers frequent, like malls, to attract as many customers as possible.

Question 21

How do nearby shops affect the location decision of a retailing firm [2]

Answer 21

being located to other shops that are visited regularly will also attract the attention of customers into the shop. Being near competitors also helps keep an eye on competition and snatch away customers.

Question 22

How does customer parking availability affect the location decisions of a retailing firm? [2]

Answer 22

when parking is available nearby, more people will find it convenient to shop in that area.

Question 23

How is the availability of suitable vacant premises? [2]

Answer 23

Obviously, there needs to be a vacant premise available to set up the business. Vacant premises can also help the business expand their premises in the future.

Question 24

How does rent and taxes affect the location decisions of a retailing firm? [2]

Answer 24

rents and taxes on the locations need to be affordable.

Question 25

How does access to delivery vehicles affect the location decision of a retailing firm? [2]

Answer 25

if the retailer has home delivery services, then delivery vehicles will be required.

Question 26

how does security affect the location decisions of a retailing firm? [2]

Answer 26

high rates of crime and theft can happen in shops. Shopping complexes with security guards will thus be preferred by firms.

Question 27

Why are businesses located in different countries? [6]

Answer 27

1. new markets overseas
2. cheaper or new raw materials available in other countries
3. cheaper and/or skilled workers are available overseas
4. rent/taxes are lower
5. availability of government grants and other incentives
6. avoid trade barriers and tariffs: when exporting goods, there are some tariffs, rule and regulations to get by, so firms move to the country to avoid this

Question 28

How do governments influence location decisions? [2]

Answer 28

1. to encourage businesses to set up and expand in areas of high unemployment and under-development. Grants and subsidies can be given to businesses that are set up in such areas.
2. to discourage firms from setting in areas that are overcrowded or reowned for natural beauty. Planning restrictions can be put into place to do so.