Location (DP IB Business Management: HL): Exam Questions

W H Hausman operates a chain of greenhouse farming facilities that grow fresh herbs and vegetables. The business selected its current location in a rural area due to the availability of large, affordable land plots and easy access to renewable energy sources.

While the location supports sustainable operations, it limits W H Hausman’s access to urban markets, requiring additional transportation to reach customers. The company is considering relocating to an area closer to its key customers but faces challenges such as higher rental costs and the potential disruption of its eco-friendly initiatives.

W H Hausman operates a chain of greenhouse farming facilities that grow fresh herbs and vegetables. The business selected its current location in a rural area due to the availability of large, affordable land plots and easy access to renewable energy sources.

While the location supports sustainable operations, it limits W H Hausman’s access to urban markets, requiring additional transportation to reach customers. The company is considering relocating to an area closer to its key customers but faces challenges such as higher rental costs and the potential disruption of its eco-friendly initiatives.

SoleMate operates a chain of shoe shops specialising in affordable yet fashionable footwear for men, women, and children. The company’s stores are located primarily in suburban shopping centres, providing ample parking and convenience for families. This aligns with SoleMate’s mission to make stylish footwear accessible to budget-conscious households.

Recently, SoleMate has experienced declining sales in suburban locations due to increased competition from online retailers. To address this, the company is considering expanding into urban high streets to attract a younger, trendier demographic and improve brand visibility.

However, moving into urban areas presents challenges. The cost of renting a high street store is approximately 50% higher than the rent in suburban shopping centres. Additionally, SoleMate will need to invest an estimated £50,000 per store to redesign interiors and tailor its product offerings to meet urban customer preferences. Despite these costs, the management believes the shift could rejuvenate the brand and position SoleMate for long-term growth.

SoleMate operates a chain of shoe shops specialising in affordable yet fashionable footwear for men, women, and children. The company’s stores are located primarily in suburban shopping centres, providing ample parking and convenience for families. This aligns with SoleMate’s mission to make stylish footwear accessible to budget-conscious households.

Recently, SoleMate has experienced declining sales in suburban locations due to increased competition from online retailers. To address this, the company is considering expanding into urban high streets to attract a younger, trendier demographic and improve brand visibility.

However, moving into urban areas presents challenges. The cost of renting a high street store is approximately 50% higher than the rent in suburban shopping centres. Additionally, SoleMate will need to invest an estimated £50,000 per store to redesign interiors and tailor its product offerings to meet urban customer preferences. Despite these costs, the management believes the shift could rejuvenate the brand and position SoleMate for long-term growth.

BrightGrow operates nurseries supplying ornamental plants to homeowners and garden centres. Its main facility is located near a highway, ensuring efficient delivery routes to regional customers. BrightGrow is known for its eco-friendly practices, such as using organic fertilisers and water-efficient irrigation systems, which align with its mission to promote sustainable gardening.

BrightGrow is considering opening a second nursery in a neighbouring region to meet growing demand for its products. The new nursery is expected to cost £300,000 to establish, including the purchase of land, construction, and initial setup of greenhouses. Local government representatives support the expansion, as it could create jobs and boost the local economy. However, some environmental groups have expressed concerns about potential habitat disruption caused by the new facility.

The company is evaluating key factors such as market potential, transportation infrastructure, environmental impact, and stakeholder views. Management aims to ensure the new nursery aligns with its sustainability goals while meeting the needs of its expanding customer base.

BrightGrow operates nurseries supplying ornamental plants to homeowners and garden centres. Its main facility is located near a highway, ensuring efficient delivery routes to regional customers. BrightGrow is known for its eco-friendly practices, such as using organic fertilisers and water-efficient irrigation systems, which align with its mission to promote sustainable gardening.

BrightGrow is considering opening a second nursery in a neighbouring region to meet growing demand for its products. The new nursery is expected to cost £300,000 to establish, including the purchase of land, construction, and initial setup of greenhouses. Local government representatives support the expansion, as it could create jobs and boost the local economy. However, some environmental groups have expressed concerns about potential habitat disruption caused by the new facility.

The company is evaluating key factors such as market potential, transportation infrastructure, environmental impact, and stakeholder views. Management aims to ensure the new nursery aligns with its sustainability goals while meeting the needs of its expanding customer base.

SoleMate operates a successful chain of shoe shops specialising in affordable yet fashionable footwear for men, women and children. The company’s stores are currently located in suburban shopping centres known for their convenience, ample parking and appeal to family-orientated, budget-conscious shoppers. This location strategy has helped SoleMate grow steadily over the past decade, building strong brand loyalty among families

Recently, however, SoleMate has faced declining sales in its suburban locations due to increased competition from online retailers offering wider selections and discounts. To address this, the company’s management is considering expanding into urban high streets. This strategic move aims to attract younger, trend-conscious consumers, improve brand visibility and rejuvenate the SoleMate brand

The shift into urban areas comes with significant challenges. Urban high street rents are 50% higher than those in suburban shopping centres, adding financial pressure. Additionally, SoleMate must invest an estimated $65,000 per store to redesign interiors, improve aesthetics and tailor its product range to suit urban tastes. Despite these costs, management believes urban stores could bring long-term growth by positioning SoleMate as a more modern and dynamic brand

To evaluate this decision, the company conducted market research, including competitor analysis and customer surveys. Findings showed that 65% of urban shoppers prioritise affordability, but brand image and style are also critical factors. A competitor analysis revealed that rival urban shoe stores charge an average of $50–$70 per pair of shoes, a price point SoleMate could compete with by carefully managing production and overhead costs

Management forecasts that each new urban store could generate a monthly revenue of $25,000, with operating costs projected at $18,000. If successful, this strategy could offset the decline in suburban sales and enable SoleMate to reach a new, profitable market segment. However, there is a risk that the urban move may alienate SoleMate’s core family-orientated customers if brand messaging becomes too focused on younger demographics

The decision to expand will require careful consideration of the financial, operational and strategic implications to ensure the expansion aligns with SoleMate’s long-term goals

Table 1: Financial comparison – Suburban vs urban locations

Table 2: Competitor analysis – Urban shoe retailers

Graph 1: Customer priorities for urban shoe shopping

The following graph illustrates urban customers' priorities when shopping for shoes, based on SoleMate’s market research.

BrightGrow is a private limited company that operates nurseries, supplying ornamental plants to homeowners and garden centres. Its main facility is located near a major highway, ensuring efficient delivery routes to regional customers. Known for its eco-friendly practices, BrightGrow uses organic fertilisers and water-efficient irrigation systems, aligning with its mission to promote sustainable gardening

To meet growing demand, BrightGrow is considering opening a second nursery in a neighbouring region. The new facility is expected to cost $300,000, covering land purchase, construction and greenhouse setup. The expansion has gained support from local government representatives due to its potential to create jobs and boost the regional economy. However, environmental groups have expressed concerns about habitat disruption caused by the project

BrightGrow’s management is exploring various options to finance the expansion. The company has historically relied on retained profits and short-term loans for projects. While retained profits are available, the finance director is concerned that using too much of this reserve might limit flexibility for future investments. A bank loan is being considered, but the operations manager expressed caution about increasing long-term liabilities, especially as current repayments already account for a significant portion of cash flow. Another potential option is applying for a government grant. The CEO believes that this would align well with BrightGrow’s sustainability goals, but the finance team has raised concerns about the competitiveness of the application process and the time required to secure approval

Key factors being evaluated include market potential, transportation infrastructure, environmental impact and stakeholder opinions. The proposed location offers good road links and proximity to the target market, which could reduce delivery times and costs. BrightGrow also aims to ensure that the new nursery aligns with its sustainability goals while meeting the needs of its expanding customer base

Table 1: Financial and operational metrics (2023)

Table 2: Location and financing evaluation

Table 3: BrightGrow – Extracts from statement of financial position (2023)