Study Notes
Decisions on location involve choosing where a business should be based, considering factors like proximity to markets, labour, materials, and competitors, as well as the nature of the business activity and the impact of the internet.
- Proximity to market — Being close to customers to reduce delivery times and costs. Example: A bakery located in a busy city center to attract more customers.
- Proximity to labour — Access to a skilled workforce needed for business operations. Example: A tech company near a university to hire graduates.
- Proximity to materials — Being near raw materials to reduce transportation costs. Example: A furniture manufacturer near a timber supplier.
- Proximity to competitors — Locating near competitors can attract more customers. Example: A fast-food chain in a food court.
- Nature of the business activity — The type of business influences location needs. Example: An online retailer needing a large warehouse.
- Impact of the internet — E-commerce allows businesses to operate without a physical storefront. Example: An online clothing store operating from a remote warehouse.
- Legal controls and trade blocs — Government regulations and trade agreements affecting location. Example: A factory relocating to benefit from lower taxes in a trade bloc.
Exam Tips
Key Definitions to Remember
- Proximity to market
- Proximity to labour
- Proximity to materials
- Proximity to competitors
- Nature of the business activity
- Impact of the internet
- Legal controls and trade blocs
Common Confusions
- Confusing proximity to market with proximity to materials
- Overlooking the impact of e-commerce on location decisions
Typical Exam Questions
- Why might a business choose to locate near its competitors? To attract customers who are shopping around and to benefit from a cluster of similar businesses.
- How does the internet influence business location decisions? It allows businesses to operate without a physical storefront, reducing costs.
- What role do government incentives play in location decisions? They can reduce costs through subsidies or tax breaks, encouraging businesses to locate in certain areas.
What Examiners Usually Test
- Understanding of factors influencing location decisions
- Ability to apply location factors to different types of businesses
- Knowledge of how legal controls affect business location