Different Location Needs for Manufacturing & Service Businesses (Cambridge (CIE) O Level Business Studies)

Location Decisions

• Location is the site from which a business decides to operate

• A business may look for a new location if it is setting up for the first time or the existing location no longer meets its needs

  • A new site may become available that is more attractive to the business, e.g. it has a larger staff car park or room for further expansion

• The business may look to locate sites in their home country or abroad

  • Large companies such as Apple or Nike have chosen to locate their factories where labour and material costs are low

• Choosing a good location can generate positive impacts for the business 

Diagram: the impact of a good location

• Many businesses have failed due to having established themselves in a poor location

  • A good location can reduce costs, whereas a poor location will increase them

  • A good location provides excellent access to sufficient customers, whereas a poor location limits customer interactions

  • A good location provides access to a skilled workforce, whereas a poor location limits access to the required human skills

Factors Affecting the Location of a Manufacturing Business

• The ideal business location depends upon the type of business and what it produces/sells

  • Manufacturing business are likely to have different location priorities than service sector businesses 

  • B2B businesses are unlikely to need to locate close to passing trade, whilst B2C businesses may choose a location with high footfall

Diagram: factors affecting the manufacturing location

Explanation of Factors Affecting the Location of a Manufacturing Business

Factors Affecting the Location of a Service Business

• Businesses in the service sector also consider further factors when determining a suitable location

  • Proximity to customers is very important for retail businesses

    • Premises must be accessible and convenient so a location with a car park or close to transport links is likely to be a key influence

    • Locating in areas with high footfall, such as on a high street or in a shopping mall, is a popular choice for retailers

  • In some cases, a location may be chosen to take advantage of a shared customer base or a particular reputation

    • Examples include bookshops on London's Charing Cross Road and luxury fashion brands on New York's Fifth Avenue

  • Climate and geographical factors can be a key factor for some specialist service providers

    • E.g. Businesses offering ski instruction will locate in mountainous areas with high annual snowfall

  • Services businesses that do not rely on passing trade may locate in out-of-town premises

    • Rent and business rates tend to be lower

    • Incentives for job creation such as grants may be available from local authorities

  • In addition, businesses are likely to avoid locating in areas with high levels of anti-social behaviour and crime, as this could impact insurance costs