Business Location

Business Location

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?

Quantitative Factors

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:

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

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

Qualitative Factors

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

International Location

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)

Business Location

Business Location

Qualitative Factors

International Location

Quantitative Factors

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