1.5 Business Location
Why is a Business's Location Important?
A business will need to carefully consider where it locates itself. A business which pays too much rent, or is too far from its customers, suppliers, or staff will struggle to survive.
Factors for a Business to Consider:
The type of Business
Different types of business have different requirements for land and accessibility by customers and suppliers.
Example
A farm needs lots of land with good-quality soil.
Proximity to Market
How close the business is to customers and competitors. There should be a good amount of potential customers nearby, but not too many competitors.
Example
A new coffee shop could open in a shopping centre where there are lots of potential customers, but not next door to a Starbucks!
Availability of Raw Materials
Being close to suppliers can reduce transport costs and time. This is especially important if the business relies on fresh goods.
Example
A fish market should be close to a harbour where fishing boats dock.
Availability and Cost of Labour
There should be enough local people willing to work at the business, with the right skills, and at a wage which suits all.
Example
In most places, a scientific research business may struggle to recruit staff with suffient skills. It may have better success in a city with a university.
Transport Links
Locating near to a main road, port, or airport can provide easy access to recieve and deliver goods across the country or the world.
Example
A delivery company could save lots of time and fuel costs by being next to a motorway junction.
Availability of Technology
Does the business need a specific type of technology to be available locally? This could include fast broadband or skilled machine operators.
Example
A web-based business would require superfast fibre broadband. This may not be available in rural locations.
Costs
Probably the most important consideration. Business properties can be very expensive, especially city centre retail property. Could a cheaper location away from the centre reduce costs whilst still capturing passing trade?
Example
Many businesses now encourage staff to work from home and have moved to smaller offices for remaining employees.
Locating a Business Overseas
Sometimes a business will close or reduce its UK operations and move abroad.
Advantages
- Reduced labour costs — lower rates of pay in some other countries
- Access to resources — some resources, such as exotic fruit, cannot be grown in the UK
- Financial incentives — lower rates of tax offered by some governments
Disadvantages
- Currency conversion — costs associated with converting between currencies, and exchange rate fluctuations
- Different laws — a business must comply with the laws of each country they deal with
- Time zones — can be a barrier to communication
- Different tastes — products may fail, or need significant changes to succeed
1.4 Stakeholders
1.6a Business Planning