Location decisions
Locating a business
- Where a business sits affects its costs and sales. A manufacturing business looks at:
- nearness to raw materials (heavy materials cost a lot to move),
- nearness to the market, land cost/size, suitable labour, transport links, government grants.
- A service business cares more about being close to customers and passing foot traffic.
Practice
A manufacturing business with heavy raw materials will especially value:
Heavy/bulky materials cost a lot to move, so manufacturers locate near them; services locate near customers.
Practice
A service business such as a shop mostly wants to be near:
Service businesses depend on being close to customers and passing trade.
Locating abroad
- A business may produce/sell in another country to reach new customers, pay lower wages/rent, get nearer raw materials, or avoid tariffs (taxes on imports).
- But it must handle different laws, languages and customs.
Practice
Making goods inside another country can help a business avoid that country's tariffs on imports.
Producing locally avoids import tariffs, though the firm must follow that country's laws.
You've got it
Key idea
- manufacturing location: raw materials, market, land, labour, transport, grants
- a service business locates near customers and foot traffic
- locating abroad: cheaper/closer or avoids tariffs, but different laws and languages