Business Location

Business LocationAS Business Studies

Aims and ObjectivesAim:• Understand the factors influencing location

decisions.Objectives:• Explain demand and supply factors • Analyse the benefits of choosing the right 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 costs.

• Location also potentially affects ability to generate sales and deliver customer service.

• A poor choice of location is costly to change.

Location Factors

What factors would affect a businesses’ location decision?

Three Key Location Factors

Costs of The Operation

Desired Customer

Service Level

Potential Revenues

Supply Factors These are mainly concerned with the operating costs of the location.

Demand Factors These factors mainly affect customer service and revenues.

Location Supply Factors

Labour Costs

Land and Building

Costs

Energy Costs

Transport Costs

http://www.bbc.co.uk/news/magazine-17543356

http://www.bbc.co.uk/news/business-19924010

Location Demand FactorsCustomer

Convenience

Labour Skills

Site SuitabilityImage

Expansion Potential

http://www.527oxfordstreet.com/experience/EnlargedVideo/

http://www.youtube.com/watch?v=RlMFkSt9rAU

Qualitative and Quantitative

Qualitative Factors• Image• Tradition• Personal preferences

Quantitative Factors• Costs• Customers• Size of market• Suppliers

Benefits of Good Location

In groups decide on the benefits of a good business location.

Benefits of Good Location

• Optimal revenue opportunities – customer service is not inconvenienced through a choice of location.

• An acceptable rate of return on investment – all business projects compete for uses of cash, business location is no different.

• Access to labour force – which enables the business to achieve the objectives of the firm through production and raising revenues.

Costs of Relocating

What costs may be involved in the relocation

of a business?

Costs of Relocation• Recruiting and training staff in the new

location.

• Duplicated property costs – e.g. remaining period on the original lease + upfront payments on new lease.

• Costs of physical transfer – moving of assets and stocks.

Multi Site Locations

Multi-Site: where a business operates from more than one location.

Examples of Multi-Site Businesses

Examples of Multi-Site Growth

• Retailer expands by launching the same format in other locations nearby and then across the UK.

• Manufacturer establishes regional distribution centres.

• Franchisor expands by selling geographical territories to franchisees.

• UK bank opens a call centre operation overseas.

Examples of Multi-Site Growth

Examples of Multi-Site Retrenchment

Depends on….• What does the success of locating successfully

depend on?

• Target market is right?• Research conducted into location• Costs of the location being manageable

January 2011

Plan your answer first using the planning sheet