IB Business & Management
5.5 Business Location
Location Decisions
• Deciding where to locate a new business is really important.
• What could happen if the wrong location is chosen?
Location within a City/Country
Task
• Watch the video clip about Tom Sutherland choosing a premises for his business.
• What considerations is he thinking about in choosing the location?
Task – In pairs discuss 10 mins
• The following businesses want to open in the Shanghai area
• What factors do you think the following businesses would be important when deciding where to locate?
• Write down as many factors as possible• What kind of areas in Shanghai would
they be likely to locate?
A new kebab shop
A car component manufacturer who supplies to Toyota
A Foxconn Factory to produce iPhones
A new Ikea store
An insurance company call centre
A cosmetic surgery clinic
A new H&M store
A Travel Agency
A boutique selling designer clothes
Task
• Draw a diagram to show all of the different factors affecting location that we have discussed
Business Location
Factors affecting location decisions
Cost of land/rent
Proximity/ Accessibility to Customers
Proximity to
Suppliers
Proximity to transport networks
Cost of labour
Availability of skilled labour
Government policies
Passing Trade
Location of competitors
Availability of land Image Management
preference
Local Knowledge
Infrastructure
Ethical factors
TASKAre the following statements true/false. Explain why….
Businesses will always locate as far away from their competitors as
possible
The cheapest location is usually the best one to
pick
It is more important for tertiary sector businesses to locate near to their
customers
Manufacturing businesses must locate close to their suppliers so they can
get their raw materials quicker
International Location
International Location
• Multinational companies can operate all over the world
• There are some additional factors which firms might take into consideration in deciding which countries to locate in….
• Can you think of any?
Additional international factors…….
• Avoiding trade barriers• Financial Incentives• Cost of Labour• Skill of labour• Language barriers• Proximity to markets• Proximity to suppliers• Political stability• Infrastructure
Task
• Look at the 2 examples of international business location decisions.
• Why might they have made this location decision?
Nissan Locating in Sunderland UK
HSBC locating their call centre in India
Location and the changing environment……
How could these issues impact on business location
decisions?
The rise of E-Commerce
Decrease in shipping costs
Task
• Watch the video…… ‘How containerization shaped the modern world’
Emerging Markets
The rise of teleworking
RELOCATION
Think….
• Industrial inertia describes a stage at which an industry prefers to run in its former location although the main alluring factors are gone.
• What factors might make a business consider relocation?
• Relocation is usually a decision that is costly in the short-term but cost saving in the long term
Difficulties of Relocation:
• Physical Relocation costs• Loss of skilled and loyal workers• Possibly new customers and
suppliers needed• Potential damage to corporate image• Redundancy payments• Loss of production during transition
phase