Principles of Business

Location of Business
Form 4

One important factor to consider when establishing a new business is its location. Considerations
may involve being close to a market, building on sites where costs are low, or choosing an area
where labour is plentiful and wages are cheap.
Later on a firm may choose to relocate because costs have become too high at the original
location or the business has need for a larger space to operate.
Factors affecting location are:

- Infrastructure: this refers to the key facilities necessary for the production of a good or
provision of a service like buildings, good transport links, power, roads, communication
(phone, wifi), supplies etc. Businesses require access to these facilities and they are
critical to their success.

- Power and water supplies: a business must consider five standard utilities: gas,
electricity, water, waste disposal and drainage. Power is important to manufacturing and
large service organisations (banks, insurance companies). Industries such as food
preparation and paper production use large quantities of water. Food processing creates
waste, and the cost of waste disposal will affect the choice of location.

- Telecommunications: Businesses need strong communication systems especially in the

Caribbean where many companies trade and communicate globally. It is therefore
essential to locate in areas where communications are clear and reliable. Cities with
excellent wireless and broadband facilities can be attractive to new businesses.

- Transport Links: two major influences on transport costs are the type of raw materials
used and how near the company is to its market. Heavy bulky materials and companies
that use them (iron and sugar production) will incur high transport costs.

Many businesses like hotels and factories set up close to major roads, junctions, rail
stations, sea ports or airports to reduce these costs and place them close to their
customers.

- Health facilities: are an important part of business, especially industries that are far more
likely to result in accidents or injuries (mining, farming, petroleum refining). Employers
also benefit from having easy access to health facilities to keep their workforce healthy
and capable of effective work.
 - Supply of labour: If a business wants a large pool
of cheap labour, they might set up in areas where there are not many existing employers.
If they want skilled labour, they will need to set up where they are most likely to find
those skills.

- Government regulations: This can have a major impact on business locations

1. Due to the lack of regulations and rules laws and taxes in some Caribbean islands
businesses may choose to locate there as this helps to reduce business costs and less
paperwork is required to carry out business (offshore financial institutions).

2. Provision of financial support, such as grants and tax incentives attract new
businesses to set up in some regions. These will usually be areas of high
unemployment, where a new business will provide jobs and therefore help improve
the economy.

3. There are legal factors involved in choosing a location such as industrial premises are
not allowed to locate in residential areas. This protects the environment of towns,
cities and villages

- Availability and location of raw materials and supply

If the raw materials used in the creation of a product is heavy and bulky and expensive to
transport (iron ore) it makes sense to locate near the source.

- Geography: 1. Natural features( terrain of land, availability of water supplies etc)

2. Population (the size of the local population, age etc.)
3. Thie industries that already exist in a region (suppliers, competitors)
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