1.4 Decisions on location
- Syllabus
- 2026
- Topic
- 1.4
- Level
- —
Learning objectives
Judge a business location from operating needs and trade-offs
A suitable location gives a business the access it needs at an acceptable total cost; the decisive factor depends on what the business does and how it reaches customers.
| Factor | Business mechanism | When it may matter most / trade-off |
|---|---|---|
| proximity to market | shorter journeys can improve convenience, delivery speed and customer access | face-to-face services and perishable goods; central sites may have higher rent |
| proximity to labour | access to enough workers with the required skills can protect capacity and quality | specialist production/services; skilled locations may have higher wages |
| proximity to materials | reduces inbound time, transport cost and disruption | bulky, fragile, perishable or frequently delivered inputs |
| proximity to competitors | locating away may reduce direct rivalry; locating near may attract customers to an established cluster | effect depends on differentiation and customer comparison |
| nature of activity | factories need space, utilities and logistics; shops/services may need footfall; digital sellers need fulfilment and connectivity | the operating model sets the location criteria |
| internet: e-commerce/fixed premises | online selling can reach distant markets without a prime shop | warehouses, delivery, returns, connectivity or face-to-face contact still require location choices |
| legal controls | planning, safety, environmental, employment or operating rules can permit, restrict or raise the cost of a site | compare compliance and delay, not just rent |
| trade blocs | locating inside a served trade area may reduce barriers and improve market access | gains depend on supply chain, rules and markets served |
For relocation, compare ongoing benefits with one-off and transition costs: moving equipment, recruiting or losing workers, closing/altering premises, interrupted production and customer disruption. A cheaper future site may not repay these costs quickly.
Prioritise factors from the context, trace each to revenue, cost, quality or risk, then compare options over the relevant time horizon. A factory may prioritise skilled labour and logistics; a local service may prioritise customers and competitors.
The internet changes the weight of location factors but does not make location irrelevant. Every online business still depends on people, connectivity, stock/fulfilment or delivery infrastructure somewhere.