This document discusses location theory and factors to consider when determining the optimal location for a business or plant. It notes that location theory is concerned with the geographical placement of economic activities and is a branch of microeconomics. It then lists and describes various internal factors like production costs, and external factors like infrastructure, quality of labor, suppliers, and political/environmental regulations that should be evaluated when analyzing potential locations.

1. Roshan Mani
11ECTEC047
B.Tech. VIII Sem
E.C.E. Deptt.
GCET, Bikaner
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2. “A Plant should be located at a place where
inhabitants are interested in its success, the
product can be sold profitably and production cost
is minimum.”
- Dr. Vishweshwarya.
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3.  Location Theory is concerned with the
geographical location of economic activities.
 It is synonymous to Micro-economic Theory.
 Micro-economics is a branch of economics
that studies the behavior of individuals and
small impacting organizations in making
decisions on the allocation of limited
resources.
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4.  Demand, Supply and Equilibrium
 Elasticity
 Theory of Production
 Cost of Production
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5.  Proximity to customers
 Business Climate
 Total Costs
 Infrastructure
 Quality of Labor
 Suppliers
 Political Risks
 Government Barriers
 Trading Blocks
 Environmental Regulation
 Competitive Advantage
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6. Man
Money
Material
Means of Power
Momentum to
early start
Market
Motive
 Means of
Communication
Management
Machinery
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7.  Heavy-manufacturing facilities
◦ large, require a lot of space, and are
expensive
 Light-industry facilities
◦ smaller, cleaner plants and usually less
costly
 Retail and service facilities
◦ smallest and least costly
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8.  Government stability
 Government
regulations
 Economic stability and
growth
 Exchange rates
 Culture
 Climate
 Export import
regulations, duties and
tariffs
 Raw material
availability
 Number and
proximity of
suppliers
 Transportation and
distribution system
 Labor cost and
education
 Available technology
 Technical expertise
 Cross-border trade
regulations
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9.  Labor
 Proximity of
customers
 Number of customers
 Construction costs
 Land cost
 Financial services
 Climate
 Modes and quality of
transportation
 Transportation costs
 Proximity of
suppliers
 Education system
 Raw material
availability
 Commercial travel
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10.  Construction costs
 Land costs
 Raw material and finished goods
shipment modes
 Proximity to raw materials
 Utilities
 Labor availability
E.g. machines, engines parts
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11.  Transportation costs
 Proximity to markets
 Frequency of delivery required by
customer
 Land costs
 Easily accessible geographic region
 Education and training capabilities
E.g. Manufacture of clothes,
furniture, consumer electronics and
home appliances
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12.  Population
 Accessibility
 Visibility
 Parking
 Competition
 Safety & Security
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13.  Most efficient way to perform the task.
 Develop a valid assessment of the current
operations.
 Improve Utilization & Productivity.
 Present Workflow Process is seen clearly.
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14. For establishing any service unit we should
take into consideration of all the previous
factor which can affect the business unit &
according to that select the location which
can satisfy our most of the needs to run a
service unit.
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