Before a company starts off its business, it'll have to choose a location.
But, how do they choose their location?
Keep reading to find out the answers! ;)
There are a few areas a company will need to consider when finding the suitable location.
They want to save cost as much as possible.
Companies would want to locate their factories in places where cheaper labour can be found. For example, if the labour in India is cheaper than in US, then the company would definitely go for India.
2. Natural Resources
If a company locates its factory near where they can get their natural resources, they can save the cost of transporting these raw materials to the factories. For example, if it is a rubber company, the company would most likely go to places such as Malaysia.
The nearer the suppliers are to the factory, the more a company can cut down cost.
If the location is too competitive, the company will have to work extra hard in order to earn more profit. This means spending more money on advertising, etc. Whereas if the company chooses a location where its product fits the gap in the market, it'll be easier for the company to earn money. For example, if there are not many suppliers of washing powder in Africa, then a company locating itself in Africa will be expected to gain more benefits.
Infrastructure in a location, including road and rail networks, plays an important role in the decision making of the location of a company. The location has got to have a good infrastructure system to ensure that the process of transporting raw materials and finished goods to different places is smooth.
Building new factories may need permissions from the local government. This is easy to get in some places, compared to others. Sometimes new businesses are encouraged in certain areas, whereas sometimes the government aims to protect their local businesses by implementing laws.
7. Proximity of Suppliers and Consumers
Businesses need to get raw materials from their suppliers, they also need to deliver their finished goods to customers. This factor works both ways. If heavy or bulky raw materials are more costly to transport, the company would want to keep its factory closer to the supplier. If the raw materials are cheap to transport, while the finished goods are more costly, the company would keep its factory closer to customers. Besides, businesses providing services would usually stay closer to their customers.
Wow, it's been a long post with lots of words.
Time to take a break! See you next time! :)