importance of the Business location

1. Business Location

2. Business Location

3. Business Location
• In general a business will look to locate
its activities where the costs
of production are minimised
• The nature of the business
will heavily influence location decisions:
– Type and nature of market
– Type of business – production of goods
or services, retail, wholesale?
– Sector – primary, secondary, tertiary,
quaternary?

4. Quantitative Factors

5. Quantitative Factors
• Factors that can be measured
using quantitative techniques:
– Decision trees
– Investment appraisal
– Critical Path Analysis, etc.
• Generally associated with the costs
of production:

6. Cost
• Fixed Costs
– Site costs
– Availability of grants/subsidies
– Cost of loans associated with set up
– Cost of utilities - gas, water, electricity
– Cost of hiring fixed salaried staff
– Cost/availability of technology
• Variable Costs
– Nearness to market
– Cost of raw materials
– Cost of sourcing supplies
– Transportation costs
• Bulk increasing
• Bulk reducing
– Nearness to a supply of skilled/unskilled labour

7. Location
• Some businesses have
little choice where they
locate – a coal mine has
to be near a source of
coal but transporting the
coal to where it is
needed can be expensive
Image copyright: Joshua Argeliss, http://www.sxc.hu
• Others may depend in
some cases on specific
locations – in busy
city shopping areas,
for example – but could
have a virtual location
through developments in
technology

8. Qualitative Factors

9. Qualitative Factors
• Factors that cannot be quantified
but which may have a significant
impact on the location decision
• May influence the long term
outcome of the location decision
• Need to consider impact on and
response from stakeholders in the
business

10. International Location

11. International Location
• Many qualitative factors will have
to be considered in seeking
to locate internationally
• How easy is it to get in to the
country (for example, locating in
China can present many problems,
not least of which are the language
and cultural barriers that exist)

12. Business Location

13. Business Location

14. Qualitative Factors

15. International Location

16. Quantitative Factors

17. Cost
• Fixed Costs
– Site costs
– Availability of grants/subsidies
– Cost of loans associated with set up
– Cost of utilities - gas, water, electricity
– Cost of hiring fixed salaried staff
– Cost/availability of technology
• Variable Costs
– Nearness to market
– Cost of raw materials
– Cost of sourcing supplies
– Transportation costs
• Bulk increasing
• Bulk reducing
– Nearness to a supply of skilled/unskilled labour