Factors Influencing Location.

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Factors Influencing Location

Sometimes firms have to decide where to build a new factory. It is important to consider the different costs of different locations. Businessmen take into account the natural and acquired advantages of a particular area.

Natural Advantages

* An area may have a water source for waste disposal or cooling.

* An area may be flat or isolated and attract dangerous or unpleasant industries.

* An area may have the right climate for the production of a good.

* Weight-losing industries use bulky raw materials to produce a compact finished product and tend to locate near the source of raw materials.

Acquired Advantages

An area may have developed a number of advantages as the result of firms locating in the region. These are called external economies of scale.

Weight-gaining industries use compact raw materials to produce a bulky finished product and tend to locate near the major market for the good.

Footloose Industries

A footloose industry gains no particular advantage from any one location usually because transport costs are the same for each site.

Industrial inertia occurs when a firm continues