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