Business location This presentation covers all the key aspects relating to business location. Note for tutors: If you wish to print out these slides, with notes, it is recommended that, for greater clarity you select the ‘pure black and white’ option on the PowerPoint print dialogue box.

The importance of location Location can be: critically important quite important unimportant Students need to understand that the importance of location can vary tremendously. It can mean the importance between success and failure – or it can have little impact on profitability. Why is there a difference?

Factors which influence choice of location Labour – cost and skills Cost of premises Financial assistance and local government charges (ie business rates) Transport links (for supplies/distribution) The need to be near customers History and tradition Sales techniques (phone/internet/mail order) These are the basic factors outlined in the scheme. The final bullet point is important as this relates to a growing trend. A factor which isn’t specifically mentioned (but is covered in the Student Handbook) is nearness to similar businesses/industries. This provides external economies of scale (such as networking opportunities/specialist suppliers etc). The key reason why some firms prefer to locate near to their rivals is to attract customers who are ‘shopping around’ – hence the popularity of shopping complexes and the fact that all towns have a central business district where accountants, solicitors and estate agents can be found. In other cases, firms prefer to locate away from rivals (eg cinemas, leisure complexes, garden centres).

Factors which influence the importance of location The business activity The number/location of competitors Reliance on personal visits by customers The methods used to contact customers Reliance on local supplies Reliance on specialised labour skills Some examples are given below, but local examples would be more effective. Shops and markets need high levels of passing trade and prefer to locate near competitors and in areas which customers visit regularly (eg shopping complexes) People are more prepared to travel to specialist shops/facilities (eg Alton Towers) Companies which only contact customers by email or telephone do not need to locate near passing trade (eg lastminute.com or call centres), but those which provide a mail order service need good distribution links (eg Amazon). Reliance on local supplies is apt to result in clusters of industries in a particular area of the country, like the motor trade in the West Midlands – the same argument applies to specialist labour skills (see snapshot on Silicon patches in student handbook)

Positive effects of good location on business operations Additional sales opportunities (through passing trade, faster responsiveness) = increased income Lower total costs of running the business (rent, rates, wages and salaries, transport etc) = reduced costs This is the bottom line. If location matters then the better the location – for that firm - the higher the profits. However, students should realise that one firm is unlikely to achieve ALL the benefits and reduce ALL the costs, simply by moving down the road! However, a good example could be Cinema A, which is located in a declining area of town and paying high rent and rates and Cinema B, which locates on a major ring road out of town but has huge parking areas, a myriad of facilities and pays much lower rent/rates per square metre of space. = HIGHER PROFITS

Relocating = moving May be necessary if key factors change, eg New shopping centre opens and competitors relocate New motorway opens and diverts trade/provides new opportunities Methods of contacting customers change (from personal visits to mail order or Internet) New methods of production changes reliance on suppliers Costs increase on existing premises/alternatives would save money Many factors can affect location. British Steel (Corus) relocated when iron ore deposits in England were depleted inland and had to be imported. It moved from central Midlands and south Yorkshire to the coast. Locally, retail businesses will want to avoid declining areas of town and move to busy areas. Local shops can be seriously affected even by road works or new parking restrictions.

Assessing location First question – does location matter to this business? If so: Is it appropriate? What are the specific benefits? Where are competitors located – and does it matter? What are the costs? What are the alternatives? What would be the costs/benefits of relocating? Students who are assessing location as part of their assessment evidence need to ask these questions. They should be aware that even if the company they are investigating is obviously in a good location, asking the questions will enable them to justify this view.

Summary Location matters more to some businesses than others Various factors influence location – identify those which apply Could there be greater benefits in relocating? Important to identify the changes that could affect location in the future – if any. Useful to remind students here that ALL the factors about location will not apply to one business! Some may not matter at all. Location itself may be unimportant. If it is important – why and in what ways? Then it is possible to assess future changes which could mean it may be beneficial to move.