Location Flashcards
What are the four main factors influencing business location decisions?
Proximity to market, labor, materials, and competitors.
Why is proximity to the market important for a business?
Reduces delivery costs, ensures quick customer service, and increases convenience for customers.
How does proximity to labor affect location decisions?
Businesses need to be near skilled or cheap labor depending on their needs (e.g., tech firms in cities, factories in low-cost areas).
Why might a business locate near raw materials?
To reduce transportation costs, especially for industries that use bulky or perishable materials (e.g., mining, farming).
Pros of a business locating near raw materials
+ Lower transportation costs – Saves money on transporting heavy or perishable materials.
+ Reliable supply – Reduces delays and shortages in production.
+ Faster production – Materials are available quickly, improving efficiency.
+ Competitive advantage – Can offer lower prices due to cost savings.
Cons of a business locating near raw materials
- Limited customer base – Might be far from major markets, increasing delivery costs.
- Fewer skilled workers – Remote areas may lack trained employees.
- Higher infrastructure costs – May need extra investment in roads, transport, and utilities.
- Less business networking – Fewer nearby businesses to collaborate with.
How does proximity to competitors influence business location?
Some businesses locate near competitors (e.g., car dealerships, shopping malls) to attract more customers since there is increased customer traffic and comparison shopping, whereas businesses like petrol stations or corner shops may prefer to be farther apart to avoid direct competition
Pros of a business locating near competitors
+ More customer traffic – People visit the area knowing multiple options are available (e.g., car dealerships, shopping malls).
+ Market awareness – Easier to monitor competitors’ pricing, strategies, and trends.
+ Skilled workforce – Employees with industry experience are already in the area.
+ Business networking – Opportunities for partnerships and shared suppliers.
Cons of a business locating near competitors
- Increased competition – Harder to attract and keep customers.
- Price pressure – May have to lower prices to stay competitive, reducing profits.
- Difficult to stand out – Customers may choose competitors with stronger branding.
- Limited customer loyalty – Consumers can easily switch to rival businesses
How does the nature of business activity affect location choices?
Manufacturing needs large spaces, retail needs high foot traffic, and tech companies prefer cities with skilled workers.
How has e-commerce changed business location decisions?
Businesses can operate online without needing a physical store, reducing costs and allowing global reach.
Pros of e-commerce
+ Lower costs – No need for physical stores, reducing rent and utility expenses.
+ Global reach – Can sell to customers worldwide, increasing market size.
+ Open 24/7 – Customers can shop anytime, increasing sales potential.
+ Convenient for customers – Easy to browse, compare, and order from home.
+ Easier marketing – Can use digital advertising (SEO, social media) to target customers.
Cons of e-commerce
- High competition – Many online businesses make it harder to stand out.
- Delivery costs & delays – Shipping can be expensive, and late deliveries may upset customers.
- Security risks – Cyberattacks and fraud can threaten customer trust.
- No physical interaction – Harder to build relationships with customers compared to in-store shopping.
- Returns & refunds – Higher return rates can increase costs and reduce profits.
Why do some businesses still need fixed premises despite e-commerce?
Some industries, like restaurants, salons, and warehouses, require a physical space to operate.
How do legal controls influence location decisions?
Governments set zoning laws, environmental regulations, and minimum wage laws that affect where businesses can operate.
How do trade blocs impact business location decisions?
Businesses may locate inside trade blocs (e.g., the EU) to avoid tariffs and access larger markets.
