Q5.

What are the factors primary and secondary

factors affecting Plant Location? Explain each factor
with examples.

Answer:

Primary factors are explains bellow:

Supply of Raw Materials:

Supply of Raw Materials can be reduced the cost of transporting from
the vendor’s end to the plant. Especially those plants which located close
to the source of raw material, consume raw material in bulk, raw
material is heavy, is cheap but loses a good amount of its weight during
processing.

Nearness to Markets:
It reduces the cost of transportation also chances of the finished
products damage and spoiled in the way for example perishable
products. Moreover, a plant near to the market can supply quick service
to the customers.

 Transport Facilities:
A lot of money is spent depending upon the size of raw material and
finished goods. Accordingly, the plant location a suitable method of
transportation like roads, rail, water or air is selected. The cost of
transportation should remain fairly small in proportion to the total cost.

Availability of Labour:
Some industries need highly skilled labour while other need unskilled
and intelligent labour. But the skilled labour is difficult to get in rural
areas in comparison with industrially developed location. Also wage
pattern, cost of living and industrial relation and bargaining power of the
unions’ forms in important considerations.

Availability of Power:
Power is constant need for a plant to keep producing, because of the
wide spread use of electric power and reduce of the cost industries
decides to locate near source of fuel (coal) to cut down the fuel
transportation costs.

Supply of Capital:
Some countries and states provide aids as loans, feed money, machinery,
built up sheds, etc., to attract industrialists. It helps both parties to get
benefits from it.

Political Risk
Political uncertainties have great impact on plant location decision.
Political stability is essential for industrial growth. That political stability
fosters industrial activity. The political stability builds confidence and
political instability causes lack of confidence among the prospective and
present entrepreneurs to venture into industry which is filled with risks.

Government Policies:
The policies of the state governments and local bodies concerning labour
laws, building codes, safety, etc., are the factors that demand attention.
In order to have a balanced regional growth of industries, both central
and state governments in our country offer the package of incentives to
entrepreneurs in particular locations. The incentive package may be in
the form of exemption from a sales tax and excise duties for a specific
period.

Secondary factors are explains bellow:

Natural Factors:
For industries like leather, agriculture, textile the climate is important.
extreme dry or humid conditions are not ideal for these kinds of
industries. Also, climate conditions affect labour effectiveness and
productivity, these should be taken account of when planning a plant
location.

Government Subsidies and facilities:

Local Government licensing regulations, financial institution,
government subsidy and benefits from the government that come with
setting up a plant in rural or urban areas can provide the industries extra
advantages.

Goodwill of Place:
Apart from all above factors, sometimes plant location is selected at
some well-known places or prestigious places. Some examples are:
i. Offices at Nariman Point In Mumbai
ii. IT industry in Pune/Bengaluru
iii. A company in Silicon Valley.

Personal Factors:
Personal empathy can be a factor for plant location but it entirely
depends on persons individual’s choice. For example, Henry Ford started
his factory in Detroit (USA) because he started his career there, where he
created his Quadricycle. Most of the cooperative sugar factories are
located in the political constituency of the chairman of the factory.

Historical and Religious Factors:

With respect to service industry or related industry, where visitors
number is important, he plant location is selected near a
historical/religious place. For example, idol carving factory is always
near historical temples.

Miscellaneous factors:
Other important factors such as telephone, energy, and water cost, local
and state taxes, financing incentives offered by local or state
governments, relocation costs, and land costs may consider for plant
location.