Location for business, types of factors to be considered for location choice,

1. Choice of location for
business
Dr. N. Yuvaraj
Assistant Professor
Achariya Arts and Science College
Villianur , Puducherry

2. The location of a business can make an important difference
to its success.
Choosing the right location means taking into account a
number of factors.
Location is the place where a firm decides to site its operations.
Location decisions can have a big impact on costs and
revenues.

3. The importance of location

4. A business needs to decide on the best location taking into
account factors such as:
Customers - is the location convenient for customers?
Staff - are there sufficient numbers of local staff with the
right skills willing to work at the right wage?
Support services - are there services offering specialist
advice, training and support?

5. Cost - how much will the premises cost?
Those situated in prime locations (such as city centers) are
far more expensive to rent than edge-of-town premises.
The importance of infrastructure
Infrastructure refers to the facilities that support everyday
economic activity, e.g. roads, phone lines and gas pipes.

7. An efficient transport network enables staff to get to
work easily.
It also allows supplies to be brought in from far afield and
permits finished products to be moved to market cheaply
and quickly.

9. The impact of location depends on the type of business.
For example, it is important for shops and restaurants to
be conveniently located for customers.
A delivery-only takeaway may prefer to locate in inexpensive
premises on the edge of town close to good transport links.

10. Government and location
The government offers grants and assistance to businesses that
locate in areas with high unemployment.
Incentives include:
grants - to help with the cost of setting up a business. Grant
money does not need to be repaid.
loans - which are repayable over many years at low rates of
interest.
tax breaks - for example firms may be made exempt from
paying business rates.

11. Overseas location decisions

12. Setting up a business overseas involves a number of challenges
including:
Cultural and language barriers where managers are
unfamiliar with local customs.
Legal issues where local laws are different.
Exchange rate issues - unexpected changes in the value of
sterling can have an impact on prices, costs and profits.

13. Factors Affecting Choice of Location of an Industrial Unit:
(i) Primary and
(ii) Secondary
Proper and right choice of location is instrumental in future
success of the business.

14. (1) Primary Factors:
(i) Availability of Raw Materials
(ii)Availability of labour
(iii)Availability of Power and Fuel
(iv)Availability of Transport and Communication facilities
(v) Nearness to Market

15. (2) Secondary Factors:
(i) Nearness to adequate Banking and credit facilities
(ii) Facilities of Repairs
(iii)Fire fighting facilities
(iv)Soil, Climate and Topography of a place
(v) Govt, policies and regulations

16. (i) Momentum of an early start
(ii) Personal Industrial atmosphere
(iii)Tastes and preferences of people
(iv)Political and economic situation
(v) Possibilities of future expansion
(vi)Existence of competitive industries
(vii)Availability of research facilities

17. Supply factors These are mainly concerned with
the operating costs of the location
Demand factors These factors mainly affect customer
service and revenues
The factors that influence the choice of business location can
be divided into two broad kinds:
Looking at these two groups of factors in a little more details,
here are some of the issues a business needs to consider:

18. SUPPLY FACTORS
Labour costs
Often a major factor, particularly if the decision is to locate
in the UK, or overseas.
Labour costs vary from region to region in the UK, but the
biggest difference is between the UK and low labour cost
countries overseas.

19. Land costs
Sometimes the land will be purchased, but more often it will
be rented along with the business buildings and facilities.
Rentals can vary enormously depending on the location and
the facilities provided.
Government grants and other incentives are also often
available to reduce the land costs of locating in poorer regions.

20. Energy costs
Some businesses use substantial amounts of energy (e.g. gas,
electricity) but they should be able to negotiate a good price
for their energy needs regardless of location in the UK.
Transport costs
Transport includes the cost of getting inputs into the business
(e.g. raw materials for the production line or stocks for sale)
and also the cost of getting products delivered to customers.

21. A business needs to be close to its source of supply if the cost of
transporting raw materials is high or difficult (e.g. food processing is
often carried out close to the farms).
Community factors
The costs of a business location can be influenced by many non-
financial factors, but which can still be significant when making the
choice.
These include:
Local amenities & services (e.g. schools, professional services)
Local government attitude to supporting business (including
financial assistance)
Language & Political stability

22. DEMAND FACTORS
Customer convenience
Probably the most important factor.
Many businesses need to be located where customers find it
quick, easy and cheap to access the service being provided.
Out-of-town retail parks are situated within a convenient short
drive from major population centres.

23. Labour skills
Where specialist skills are required, this can be a big issue.
For example, technology firms tend to locate themselves in
areas where there is well-established expertise.
Site suitability
A site may need to have some particular characteristics to
maximise customer satisfaction and revenues.

24. Image
This is more intangible, but often important. Some customers
associate a product with a certain area and prefer to buy from there.
Expansion potential
Future production capacity often has to be taken into account. A
location might tick many other boxes, but if it provides limited scope
for expansion then it might be rejected. If a location restricts
output, then revenues are potentially damaged.

25. Thank you