There are many factors a business will have to consider. On the next page is a list of some of the major and influential factors. There are many factors to consider when locating a new business. These factors all play an important part in the successful sale of a product or service. For some firms only a few factors will be important. Other firms may need to consider and balance a complex mixture of location factors. One very important factor to consider however is the infrastructure of business site:
1) The business needs very good transport systems for the site. The most common forms of transport are by road, by rail, by river, and by canal. For a company that receives a lot of raw materials, proximity to a port would also be helpful. 2) The business needs good communication systems such telephone systems, fax, e-mail, etc. 3) Production is important to a business so a firm needs to know whether there are secondary firms in the area to help deal with waste disposal, repair machinery and to transport the finished good. Is there labour available? The supply of labour is another important factor to consider. The business person will need to consider whether the right kind of skilled, or semi skilled labour is available or grants for retraining if not; What the local wage rates are like; whether the housing school, and leisure facilities will attract and keep labour in the area. How much government, local authority, and EC aid is available.
Is there room for expansion? Are there any risks with the site will this raise the insurance premiums? The business needs to locate near water supplies especially paper manufacturers, pharmaceuticals, and electricity generation. Waste disposal is also important for the business as some firms produce a great deal of waste during production there are various laws, which strictly control how this should be disposed of. Prevailing wind is very important as the wind direction can take pollutants away from areas that are densely populated.
Businesses need to locate somewhere people can see it. This will also increase the chances of attracting more customers, therefore increasing sale revenue. It will also help to widen the appeal to their secondary target market. A prime location is at the corner as it has bigger frontage. Businesses also need to check the amount/intensity of competition in and near their location. It will not be wise for a small start-up to locate near big, established businesses that sell the same or similar product. However, this will allow businesses to benefit from economies of scale. Electrical companies usually do this. It gives the business an access to a major customer base and can reduce the cost of deliveries. Where are customers located? This is another important factor to take into consideration. If the main customer base is located hundreds of miles away from the location of operations, heavy transportation costs will be incurred. I believe that all the reasons stated above are very influential when it comes to a business deciding where it will locate its base of operations.
Below is an example of a survey study that specifically addressed warehousing and distribution sectors. This was survey conducted by Transportation & Distribution magazine in 1994-95. A total of 1,000 survey forms were mailed out to subscribers of the publication with 147 usable returns collected. The survey indicated that geographic location, land transportation, and high worker productivity are the most vital factors in the site selection process, followed closely by low taxes, tax exemptions, and the availability of skilled labour. The result of this survey does appear to rank taxes somewhat higher than do those studies that cover manufacturing or industry in general. The 25 factors from this study are listed in Table 5-1, in order of decreasing importance to the survey respondents. The tax variable “low taxes” ranked fourth on the list of 25 with an average score of 3.50; “tax exemptions” was fifth with an average score of 3.30, and “tax credits” were seventh with an average score of 3.28.