What are the key factors that influence the choice of location?

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Presentation transcript:

What are the key factors that influence the choice of location?

Technology Increasingly possible to work from home, or away from the office – teleworking 3.3 million teleworkers in the UK are self-employed 41% of self-employed people in the UK are teleworkers

What are the benefits of teleworking? Flexibility Location Time flexibility Staffing Reduced costs/lack of overheads

Cost of site Least-cost site is the business location that allows a firm to minimise its costs & hence selling price Cost particularly important to start-ups and small businesses Low cost of location may increase competitiveness

Costs of location include: Land costs Labour costs Wage variations across regions BUT need particular skills Transport costs Bulk reducing or weight-losing industries, least-cost site is close to raw materials Bulk increasing or weight-gaining industries locate closer to the market than raw materials Location of suppliers may be key

Infrastructure Transport links, e.g. road network Employee access to workplace Access to services Local infrastructure may be key

The market Most important influence for retailers and other service industries Customers expect convenience & easy access Small retailers look at ‘footfall’ in an area (number of potential customers walking past the shop) Locate near to competitors? Locate near to complementary companies Enhance revenue rather than cut costs

Convenience Natural inclination of entrepreneur is to start operating from where he/she lives

USP Unusual premises may be an attractive feature of the business

Quality of life Location may not be ideal from least-cost perspective, but may offer other compensation

Industrial inertia Once established, a firm may be reluctant to locate elsewhere Personal reasons Loyalty to existing labour force Fear of change Lower morale & productivity due to relocation Cost of relocation Transitional difficulties while adjusting to new location

Location & Success Poor location is one of the main causes of small business failure Least-cost site not ideal – convenience to customer is more important Revenue generated by a good location will more than offset the additional cost of that location

Key factors for small firms Demographic – does local population match target market? Economic wealth of the area Footfall during opening hours Parking factors Competitors’ locations Location history – did site have a good track record of successful business activity? Council policies (e.g. limiting some business activities)