Business Location A2 Business Studies

Aims and Objectives Aim: Understand the demand and supply factors influencing location decisions. Objectives: Explain demand and supply factors Analyse how demand and supply factors influence business location Evaluate what the success of location decisions may depend on.

Starter Why is a businesses location important?

Why Location Matters Choice of location has a direct effect on operational costs. Location also potentially affects ability to generate sales and deliver customer service. A poor choice of location is costly to change.

Three Key Location Factors Costs of The Operation Desired Customer Service Level Potential Revenues Supply FactorsThese are mainly concerned with the operating costs of the location. Demand FactorsThese factors mainly affect customer service and revenues.

Supply Factors In groups brainstorm supply factors of location. Remember they will be mainly concerned with the operating costs of the location!

Location Supply Factors Labour Costs Land and Building Costs Energy Costs Transport Costs Community Factors

Labour Costs Often a major factors especially between the decision to locate in the UK or overseas. Minimum Wage Rates Globally: UK Minimum WAUS Minimum Wage Polish Minimum Wage Chinese Minimum Wage £6.19£4.51£2.51£1.04

Land and Building Costs Usually premises are rented. Rentals vary enormously depending on location. Government grants reduce the land costs of locating in poorer regions.

Energy Costs What do energy providers blame their price rises on? Businesses are more concerned with security of supply, unless reliant on electricity.

Transport Costs Costs of getting inputs to the business. Location needs to be close to the source of supply if the cost of transporting raw materials is high or difficult. E.g. food processing carried out close to farms.

Community Factors Costs of a location can be influenced by: – Surrounding schools – Language and political stability – Government attitude towards enterprise For each of the above factors how may location costs be affected?

Demand Factors In groups brainstorm demand factors of location. Remember they will mainly affect customer service and revenues.

Location Demand Factors Customer Convenience Labour Skills Site Suitability Image Expansion Potential

Customer Convenience Many business need to locate where their customers find it quick, easy and cheap to access the service being provided. Footfall is very important to retail businesses.

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Labour Skills Firms sometimes need to locate near areas of specialist labour. E.g. technology firms locating themselves in Sillicon Valley AU AU

Site Suitability A site may need to have particular characteristics to maximise revenues. E.g. a luxury restaurant or hotel needs to be located in a central area near tourist attractions. E.g. Witchery/Secret Garden located near Edinburgh Castle.

Image Some customers prefer to buy from a particular location. E.g. a walking equipment business in Peak District may do better than one in Milton Keynes.

Expansion Potential Businesses must consider future production capacity. Needs to be scope for potential expansion. Location needs not to restrict output and therefore revenues.

Toyota & Location Highlight the demand and supply factors in the article. Which factors were important in Toyota’s decision to locate in Derby? What was more significant? Demand or Supply factors? What may the long run success of Toyota decision to locate in Derby depend on?