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The location of businesses.

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Introduction

The Location of Businesses Businesses can choose where to locate. Sometimes choice of location is critical. In other cases it is less important. What is the difference? And what happens when a 'right choice' suddenly becomes a wrong choice? Factors influencing location Every business locates where it thinks it will be successful. If you remember that businesses need: * staff to work there * raw materials to produce finished products * customers * to keep their costs as low as possible then their reasons for choosing a particular location begin to make sense. Local labour supply All organizations need to be able to employ staff. So it makes sense to locate where people live. A factory in a remote part of the Scottish Highlands would have trouble finding anyone to work there. Motorway service stations have to pay to transport their staff from local towns and villages to the station itself, a cost which other businesses can avoid. The factors which influence a particular area are often local skills and cost of labour. Local skills In some parts of the country particular skills are a tradition. If you wanted to set up a business making pottery you would be sensible to locate in the Midlands, around Stoke-On-Trent. If you wanted to make cutlery, then Sheffield is the place. If you were making boots or shoes then Northamptonshire is the area for you. Probably the most famous examples today are in the United States. ...read more.

Middle

So the pool of skilled labour in the area is affecting the cost for firms. The cost of labour will always be more important to businesses that are more labour intensive than those which are capital intensive. A labour intensive is one which needs a higher number of staff - such as call centres or schools and colleges. A capital intensive business is one where machines or technology do most of the work - as in a modern electricity generating plant. Here the cost of labour is less important in the choice of location. The Cost of Premises The cost of premises is determined by the forces of demand and supply. The greater the demand for premises - and the fewer there are available - the higher the cost. For that purpose, premises in city centres - especially in London - are much more expensive than the cost of premises in the suburbs or in the regions. For example, the lease of a large store (60,000 square feet) in Oxford Street, London, was on sale for �12,000,000 in 1997! This is because Oxford Street is a prime site - in a town a large high street store would be less but not cheap. In 1997, Mark & Spencer bought 19 high street stores from Littlewoods for �192,500,000, paying 'over the odds' for the stores it wanted. ...read more.

Conclusion

Between 1985 and 1988, the scheme created 100,000 jobs, reducing employment by 0.5 per cent in the Assisted Areas, at a cost of �130,000,000 a year. In 1998 the European guidelines on regional aid changed and all member states were asked to propose new Assisted Areas to operate from 1st January 2000. In July 1999 the Department of Trade and Industry put forward the new proposals which included the following. * Tier One (maximum) assistance for Cornwall, Merseyside, South-Yorkshire and West-Wales and the Valleys. Here grants of up to 40 per cent of the project cost will be available. The government has also proposed that Northern Ireland be treated as an exceptional case for assistance. * Tier Two assistance for areas most in need of employment creation, investment and regeneration. For these areas a 20 per cent assistance grant will be available. This includes the Highlands and Islands and various areas in England, Wales and Scotland. Rather than designate towns or cities the government has used 'ward boundaries' (which denote voting areas). * Tier Three assistance for Enterprise Grant Areas where assistance will be available to businesses employing up to 250 people. The aim is to encourage the development of small businesses as these are seen as vital for improving employment and prosperity long term. Once the new Assisted Areas have been agreed by the European Commission, they will remain in force from 1st January 2000 to 31st December 2006. Transport Links for Suppliers and Distribution ...read more.

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