© Boardworks Ltd 2006 1 of 23 Business Location Business Location Unit 1: Investigating Business © Boardworks Ltd 2007 Teacher’s notes included in the

© Boardworks Ltd 20061 of 23

Business Location

Business Location Unit 1: Investigating Business

© Boardworks Ltd 2007

Teacher’s notes included in the Notes PageFlash activity. These activities are not editable.

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Learning objectives

What factors influence the location of a business?

Does the success of a business depend on its location?



Think about what businesses are located near to where you live or go to school.

Where a business chooses to locate can have a massive impact on its success.

Introduction

What do you think these factors might be?

Have you ever wondered why large supermarkets are situated next to major roads or why travel agents can often be found on busy high streets?

Many people take the locations of such businesses for granted, but to the people that own them their locations are very important and can depend on a number of factors.


Key reasons for location

where the customers are

availability of skilled labour

transport links for supplies and distribution

cost of premises and local government charges

financial help available

history and tradition

sales techniques employed by thebusiness.

Factors which may influence a business’s choice of location include:

Pubs are often successful when located in student areas.


Think about it!

Dentist

Doctor

Newsagent

Large supermarket

Think about your local area and where the following can be found:

Draw a map showing the location of each business.

Why do you think these businesses located where they did?

Retail park

Petrol station

Clothes shop

Takeaway


Where the customers are

The location of their customers is a crucial factor for many businesses. These businesses depend on customers passing through their doors and spending money. Locating near their customer base increases their chances of making sales.

In order to be conveniently located for the largest number of possible customers, the supermarket Tesco opened centrally located Express stores in addition to its out-of-town superstores.

These Express stores are in town centres, near other shops frequented by the same customers.


Where the customers are

Some businesses do not need to be located near their customers.

Car manufacturers, for example, distribute to dealers throughout the UK and abroad. Because the manufacturers do not sell direct to the end customer, their locations are less important in this respect. They are more likely to choose locations where premises are cheap and skilled labour is close by. The dealers they distribute to, however, will need to locate near their customers. They will often also choose to locate near other car dealerships.

Can you think of any other businesses who do not need to be near their customers?


people to stock the shelvespeople to work the tillspeople to collect and manage the trolleyspeople to take deliveriespeople to work in Human Resourcespeople to work in the finance officepeople to deal with telephone enquiriespeople to deal with all the administration, e.g. typing letters, keeping records, filing, etc.

Availability of skilled labour

Businesses need people to work for them. Consequently, businesses often set up in populated areas.

A large supermarket such as Tesco needs a variety of different employees, such as:


Cost of skilled labour

The cost of labour varies in different parts of the UK, because of levels of unemployment and differences in living costs. Wages in London are usually higher than in the rest of the UK.

Wages paid in the UK are higher than in countries like India and China, but lower than some other European Union countries such as Germany or France.

In 2003, Lloyds TSB closed its call centre in Newcastle, moving operations to India.

What do you think the reasons behind this decision were?What might the long-term consequences of such a move be?


Availability of skilled labour

Companies often locate in the same region as other similar businesses to take advantage of a pool of skilled employees.

Think about how important a factor the location, skills or cost of potential employees might be to the following new businesses. Can you suggest possible areas of the UK for them to locate in?

A soft drinks manufacturer

An IT companyA sandwich shop


Transport links for supplies and distribution

As well as being near their customers, most businesses need to be easily accessible to their suppliers and distributors.

Businesses that distribute their products within the UK or overseas will have to think about access to the transport infrastructure: the major motorways, airports, seaports and rail networks that make up the transport system in the UK.

In the UK many businesses distribute their goods by road. Because of this, large manufacturers and distribution warehouses are often located close to motorway junctions.

Think of two companies that need to be located close to good road links, and two companies that do not need good transport links.


Cost of premises

The cost of premises varies in different parts of the UK. Busy areas that attract a lot of customers are in greater demand and are consequently more expensive. Premises are usually most expensive in London and the south-east of England.

Throughout the UK, premises will cost more if situated in city centres, busy high streets or shopping centres. Out-of-town areas will often offer the cheapest premises. The cost of warehouse or industrial premises is often affected by how close they are to transport links.


How much?


Local government charges

Just as every household has to pay council tax to the local council, businesses have to pay business rates. Business rates are paid to the council to cover local services, including waste disposal and road maintenance. The level of business rates is linked to the cost of renting the premises. A building in an attractive city area would be more expensive to rent than an out-of-town warehouse, so its business rates are higher. Business rates can add a considerable amount to the cost of running a business. Small businesses, in particular, can be greatly influenced by the level of business rates when deciding where to locate.


Financial help

grants and financial aid to help businesses set up

subsidized rents

business-support services.

Financial help is available to many businesses. The type and amount of financial assistance a business is eligible to receive will depend on the type of business and its location.

Many local authorities in areas of high unemployment will offer new businesses help to encourage them to locate in the area, as this creates jobs and boosts the local economy.

This help can include:


Assisted areas

Nationally, the government offers financial aid to areas of greatest need. Such areas are known as assisted areas, designated areas or enterprise zones. These areas are shown in dark green on the map.

The government also offers incentives to attract foreign businesses to the UK, and the European Union provides funds for some businesses in specific locations.


Where is it located?


In the past, the locations of industries were often dependent on geographical factors, either because of the location of raw materials or the climatic conditions. For example, Sheffield has easy access to coal, iron ore and transport links, making it ideal for the manufacture of steel. And the climate in Somerset is favourable for growing apples, resulting in the production of cider in the area.

With a massive increase in foreign imports into the UK, many of the historic and traditional reasons for the locations of businesses no longer exist. However, industries sometimes remain in traditional locations for different reasons. Some are still dependent on local materials, while others locate near their suppliers or other similar organizations.

History and tradition


Sales techniques

The ways in which businesses interact with their customers can affect their location. Some businesses, particularly those using a lot of ICT, can locate almost anywhere they choose.

For example:

Call centres can be based anywhere in the world as they only deal with customers over the phone.

Internet-based companies can also locate anywhere, although websites that sell goods online need to take transport links into account.

Mail order companies similarly need good transport links for their deliveries, but again can locate almost anywhere.


Choose your business location!


1. Many small businesses locate where the majority of customers can be found. Why is this?

2. Why might a large supermarket choose to locate near a motorway?

3. Identify three types of business where location is less important. Suggest your reasons for this.

4. Suggest two factors that could influence the following businesses when choosing a location:a) Cinema b) Fast food restaurantc) Doctor’s surgery d) Advertising agency

Question time!


Who wants to be an A* student?


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© Boardworks Ltd 2006 1 of 23 Business Location Business Location Unit 1: Investigating Business © Boardworks Ltd 2007 Teacher’s notes included in the