Operations: Location Of The Firm Flashcards
What factors does a business consider when choosing where to locate their firm?
Customers, suppliers, access to raw materials, govt assistance, high unemployment, cheap land & vast area, near good infrastructure
How does the customers factor affect where a firm is located?
Firms like to be located near their customers so as to encourage
them to be loyal, which means the firm can max their sales
How does the suppliers factor affect where a firm is located?
Firms like to be near suppliers, eg Nissan car plants in the US have a
supplier park next door to their car manufacturing plant so delivery costs
of tyres are minimised. The tyre supplier’s engineers are also on hand to
quickly resolve a problem with the parts which allows the production line
to keep flowing.
How does the access to raw materials factor affect where a firm is located?
Many food manufacturers will locate next to the source of their
produce eg farms producing their carrots. This allows the companies to
freeze the products soon after harvesting which keeps them fresher for
longer, ie field to fork in 24 hours. Raw materials can also be wind for
firms such as Wind Farms.
How does the govt assistance factor affect where a firm is located?
Firms may be attracted to a particular location as the government is
offering a grant to set up in run down areas that are experiencing low
levels of economic growth
How does the high unemployment factor affect where a firm is located?
Firms can often offer low wages when hiring workers in areas of
high unemployment as the worker has so little choice but to accept
the low wage. This will lower the firm’s costs.
How does the cheap land & vast area factor affect where a firm is located?
Land may be cheaper as it is away from the city centre and as there’s a
lot more of the land, it is easier for the firm to expand.
How does being near good infrastructure affect a firms choice of location?
The location may be near a motorway, or railway station which makes it
easier for cars to park and customers to get access.
