Business Location - Activity

Not too many years ago, studying location meant being aware of a number of key factors that determine where a business chooses to locate. Briefly these could be summarised as:

• Nearness to power
• Nearness to a supply of raw materials
• Nearness to market - which might be an intermediate customer or the final market
• Nearness to a supply of skilled labour

Each of these factors contributed in some way to a consideration of the cost of locating at site A as opposed to site B. The basic principle covering location was that a firm would locate where the costs of production were at their lowest.

Such factors as those above might be vital in some cases: for example, there would be little point locating a coalmine away from coal seams! In others, it would depend on whether the business was bulk increasing (the finished product being larger and bulkier than the raw materials) or bulk reducing (bulky raw materials but a smaller finished product).

Image: Furniture - bulk increasing or bulk reducing? What relevance might this have for decisions concerning location? Copyright: Andy Fox, stock.xchng

These days, the business landscape has changed and such factors, which may have been very relevant for heavy industry and manufacturing, are no longer of prime concern for many businesses.

The basic principle, however, may still apply - a business will be looking to minimise costs of production.

Quantitative decisions based on cost may not be the only factors that a business would have to consider in deciding where to locate. There will also be a number of qualitative factors that might influence the location at a site that may not represent the least cost option.

The changing nature of business, the movement towards more emphasis on the service sector and developments in technology mean that location is now a far more open ended but nonetheless complex matter. The news that some businesses have relocated parts of their business to the Far East, such as call centres, has raised a number of issues and upset trade unions, employees and customers alike.

Scenario

Image: Selling DVDs - ought to be easy to identify the perfect location - but is it? Copyright: Lynne Lancaster, stock.xchng

You will now be asked to consider some of the factors affecting the location of a business that sells DVDs and CDs. The business has sold primarily to individuals through the Internet but has recently built up its business supplying independent retailers with popular and hard to find titles.

The business has been established in a small market town in the south west of England but has seen rapid growth both in the UK and in markets in Europe, America and Japan. This has meant that the firm's existing premises are simply too small to house the stock it needs to carry and is therefore looking to move.

The key functional areas of the business must be housed. These are:

• Administration
• Finance
• Marketing
• Sales
• Distribution
• Warehousing

The business has a completely open mind as to where its new location/s will be. Its staff of 30, despite all being local to its existing location are relatively young and do not have problems in re-locating if necessary - even if that meant moving abroad. The staff are, however, highly qualified and trained in a number of key areas not least in the technology required to maintain their online presence.