IGCSE Business Studies 0450

Location Decisions

Lecture by
Saw Yee Mon
25/7/2021 Week 4
Contents
• Important Notes
• Factors affecting the location of manufacturing businesses
• Factors affecting the location of service sector businesses
• Factors affecting the location of a retailing business
• Activity
• Factors to be considered when deciding in which country to locate
operations
• The role of legal controls on location decisions
• Activity
Important Notes
• Main factors for choosing a site are being close to the market,
availability of of labor and cheap wages.
• If a business relocates to another country, it will gain certain
advantages, but it will also incur extra costs. For the move to make
sense, the advantages must be expected to be greater than costs.
• In the first decade of 21st century, many Western companies relocate
their firms to India and South-East Asia where costs of production
were lower.
Factors Affecting the location of manufacturing
businesses
1. Market
2. External economies of scale
3. Power supply
4. Government influence
5. Production methods
6. Climate
7. Personal preferences of the owners of business
8. Availability of labor
9. Transport and communication
10. Raw Materials and components
11. Water supply
Factors affecting the location of service sector business

1. Customers
2. Personal Preference of the owners
3. Technology
4. Availability of labor
5. Climate
6. Near to other businesses
7. Rent/Taxes
Factors affecting the location of a retailing business

1. Shoppers
2. Nearby shops
3. Customer parking
4. Availability of a suitable vacant premises
5. Rent/ Taxes
6. Access for delivery vehicles
7. Security
8. Legislation
Activity
B&C Limited is going to open a new shop selling fashion shoes. The shoes are good
quality and are aimed at young women. B&C Limited has narrowed down the
choice of where to locate the new shop to two nearby towns.

Town Y Town Z
Population 30 000 10 000
% in age group:
15 30 30 20 5 20 35 30 10 5
0–9 10–25 26–40 41–65 66+
Unemployment low high
Crime rate low low
Shopping centre large – about 100 shops small – about 40 shops
large car parks but queues build up at busy plenty of parking available – no problems
Parking facilities
times at busy times
Types of shops in the shopping clothes shops, shoe shops, banks, food shops, household goods, clothes
centre household goods, food shops shops, post office, banks
QUESTIONS
• Read the case study above.
• A) Read the information on the two towns and then select which one
will be the best location for the new shop. Justify your choice.
• B) What other information is needed to help make the final decision?
Explain why the information is needed.
Factors to be considered when deciding in which country to
locate operations

1. New markets overseas (steady increase in sales)

2. Cheaper or new source of materials (e.g. oil)
3. Labor force and wage costs
4. Rent/Taxes
5. Government grants and incentives
6. Trade and tariff barriers
The role of legal controls on location decisions
Reasons for governments to influence location decisions:
1. To encourage businesses to set up and expand in areas of high
unemployment (development areas)
2. To discourage firms from locating in overcrowded areas or on sites
which are noted for their natural beauty.

Two types of measures often used by governments:

3. Planning regulations
4. Government grants or subsidies
Activity
Case study: DEF Chemicals announces plans to build a new factory
Workers’ leaders were delighted to hear today of plans by DEF Chemicals to build a
huge new paint and chemicals plant in the Southern province. Many of these products
will be sold abroad. The factory will create 1000 new jobs in an area badly affected by
other factory closures. The new factory will require materials, components and supplies
from many local firms. It is claimed that the government is planning to offer substantial
grants to DEF for locating in this area of high unemployment.
However, it has insisted that it should not be too close to housing estates and schools.
The grants being offered have angered other firms in the same industry as being unfair
competition for them.
Local residents have mixed feelings about the plans. One elderly resident claimed: ‘It
will only bring more road traffic and risk of pollution. Don’t forget that one DEF plant in
the north was destroyed by an explosion a few years ago, killing several workers.’
However, other local people welcomed the news as it will bring more businesses and
wealth to the area.
Questions
• Read the case study above.
• a Make a list of the stakeholders likely to be affected by DEF’s plan to
build a new chemical factory.
• b For each of the groups that you identified in a, explain why they are
likely to be in support of, or are likely to oppose, these new plans.
• c Explain three reasons why, in your opinion, the government ought
to be involved in this decision.
 End of Lecture
Thank you for your attention !!!