Factors Affecting the Location of a Business - questions and answers.

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Location Strategies Practice Exercise

1. The least cost site is the location of the business which allows a firm to minimise its units costs, greater than any other location which could of been chosen.

2.Explain the significance of the term 'weight losing' with reference to the location of the industry?

When a firm is in a weight losing industry it is vitally important for the business to location next to raw materials. A weight losing industry is when the final product weighs much less than the inputs that have gone in to create it. Therefore it is cheaper to distribute the finished product to the market than it is to move the raw materials to the place of manufacture.

3. What is the meaning of the term 'Assisted Area'?

Assisted areas are the parts of the UK that have relatively low levels of economic activity and high, persistent unemployment. The assistance provided is financial normally in the form of grants from the government.

4. Examine 2 issues that components manufacturer might consider when relocating a business. Which would not be considered when a business decides on its first location?

The first factor that would be considered is the location of the current customer base. If the firm was to locate near to its market there would be reduced costs and increased flexibility. The firm could respond to changes easily, and get orders to customers in a quicker time. This improves customer satisfaction and is more likely to incur repeat sales increasing the revenue of the business gains. Also there would be reduced costs as transport costs would be less, a reduced amount of money spent on petrol could be used to  expand the business or used in research and development. Also the company would spend less time in transport, increasing efficiency and maximising profit margins.

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The second factor to consider is the location of suppliers for their components. When a components business has been established for a number of years it is likely to have relationships with a number of suppliers. This relationship due to repeat sales may incur a number of benefits such as reduced prices and increased flexibility. If it was to locate to a different area it may be too far to keep their original supplier, and increases costs. This would reduce profit margins of the business and decrease competitiveness. Alternatively research should be done to look into cost of suppliers, to ...

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