Different Location Needs for Manufacturing & Service Businesses (CIE IGCSE Business)

• 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

Irrespective of the size of the business, a good location (online or physical) reduces costs and increases sales
 

• 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

• 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 of Factors Affecting the Manufacturing Location

Manufacturing locations often require access to very specific resources, such as raw materials or labour

Explanation of Factors Affecting the Location of a Manufacturing 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