The Location Decision
The factors a business weighs when choosing where to locate, from being near its market or raw materials to the cost of the site, and why the most important factor depends on the type of business.
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Where should it set up?
Choosing where to locate is one of the biggest decisions a new business makes. The right spot can bring in customers and keep costs low, while the wrong one can sink the whole venture. This module looks at the factors a business weighs up, and shows why the factor that matters most depends on the kind of business it is.
Location words to know
Learn these before you weigh the factors.
A shop against a factory
The same factor matters differently to different businesses.
Tie the factor to the business
In the exam, never just list location factors. Take each one and tie it to what this particular business needs. A shop lives or dies on being near its customers, while a maker of heavy goods cares most about raw materials and low-cost land. Weigh the factors against each other and judge which matters most here.
Match the factor
- proximity to the market
- raw materials
- availability of labour
- location costs
- being close to the customers
- being close to the materials needed
- having enough workers nearby
- the price of the land or rent
Match the business to its priority
- a town-centre cafe
- a timber sawmill
- a large call centre
- a storage warehouse
- being near passing customers
- being near the forests it uses
- finding plenty of workers
- a large site at low cost
Where for a shop?
A small clothes shop is choosing where to open. Which location factor usually matters most to it?
- Being close to its customers where many people pass by.
- Being close to raw materials.
- Finding the cheapest possible field far from town.
- Being next to a river.
Location factors
Select the TWO genuine factors that influence a location decision.
- Whether enough workers live nearby
- The cost of the land or rent
- The favourite colour of the owner
- The owner liking sunny days
Compare the rents
Site A has a yearly rent of 40 units and site B has a yearly rent of 55 units. Subtract to find how many units dearer site B is than site A. What is the answer?
Order the decision
Put the steps of making a location decision in order, earliest first.
- Decide what kind of business it is
- List the factors that matter to it
- Compare the possible sites
- Choose the best site
Complete the summary
A high-street shop cares most about being close to its _____. A heavy factory cares more about being close to its raw _____ and about low _____. A business that needs many staff must also think about the availability of _____.
Spot the location factors
Tap the TWO things that are real location factors for a business.
- being near the market
- having workers nearby
- the design of the logo
- the name of the business
Advise the business
Read each case and choose the factor that should matter most.
- A bakery selling fresh bread to passing shoppers is choosing a site. What should matter most?
- A firm that cuts and treats heavy stone is choosing a site. What should matter most?
- Two sites suit a warehouse equally, but one costs far less to rent. What should decide it?
Explain a location choice
Explain the factors a business weighs when choosing where to locate, and why the most important factor depends on the type of business.
- Name three factors that influence a location decision
- Explain which factor matters most to a shop and why
- Explain which factor matters most to a heavy factory and why