GCSE Business- Location&Relocation

Competition

• To be closer to similar-type companies (clustering). Many companies like to cluster around other companies within the same industry. The reasons they do this are many: the work force is there, the suppliers are there, the infrastructure is there and, most of all, companies are able to benefit from an “Intellectual cross pollination” with their competitors and peers.
• The competition maybe too high and the business is losing marketshare, then the company might decide to relocate somewhere else to save their business

Costs

• Cost of labour too high
• Cost of rent/location too high
• Cost of transport and deliveries too high

Some companies move to save costs on real estate or other costs such as hydro. Some move because of logistical reasons like they want to be closer to their suppliers to save on transportation costs. Some might move to a different country because they believe the government regulations there are more favourable to their particular business. I.e. the tax rate might be lower, the environmental laws may be more lax, or the worker’s rights may not be so strong

“Cost is generally the main factor for relocation. If the company is paying too much for Union labor in one state they may try to relocate to a non-union state or a foreign country. If the company is paying too much for rent they may find a suitable replacement space for cheaper. If the company is growing the space may not accommodate the business’s needs.”

()

Affordability

• Not making enough money to pay for the costs thus not making enough profit so the business has no other choice but to relocate
• The business may have found a better profitable location and might decide to move there to increase profits

Enlarge-Expand

• Business growth: the business may have grown beyond its capacity in its current location. Relocating may be the answer. There may also be significant market growth in another area that had yet to experience a boom when the business was originally set up.
• To acquire more room. A reason a company will move to another facility is because their current facility no longer has enough space for them to do the things they need to do. One of two factors comes into play: either the surrounding property does not have enough open space to accommodate a physical expansion of the building, or management has determined that such a facility expansion on the existing site would not be cost effective.