Location factors differ by business type
Location factors depend on the business type. Manufacturers weigh proximity to raw materials, labour supply and skills, infrastructure for shipping goods, site costs, incentives and the legal environment. Service businesses weigh customer proximity and footfall above all, plus the labour market and site cost against revenue. Factors overlap, but weighting differs: a factory cares about inputs and logistics; a cafe cares about footfall.
International location: choosing a country
Choosing a country adds factors beyond a domestic site: labour costs, skills and availability (lower wages help only if productivity is adequate); infrastructure (power, transport, digital networks); government incentives and the legal environment; trade barriers (producing inside a trading bloc avoids import tariffs); and market access. Always explain WHY a factor matters for the firm, not just that it exists.
Legal controls constrain where you locate
Legal controls limit where a business may operate. Planning permission must be granted before building or changing use, and can be refused if a use clashes with neighbours. Environmental regulations limit noise, emissions and waste; breaching them brings fines or closure. Zoning laws reserve areas for industrial or residential use, so a factory cannot open in a residential zone. Legal controls are usually the constraint side of a location argument.
Drawn from real examiner reports.
Name a factor, then explain why
Listing location factors without developing them scores only knowledge marks. Weak: "locate near a good labour supply." Better: the firm needs skilled craftspeople, so a site near a large skilled labour pool cuts recruitment and training and protects quality. Always close the chain — factor, then effect, then business outcome (cost, output, quality).
s22 P11 Q3(e).
Demand/competition are not factory factors
For a manufacturer, do not give "demand" or "competition from rivals" as location factors — those suit a service business choosing a high-street site. A factory's factors are raw materials, labour supply, infrastructure for shipping goods, site costs, incentives and the legal environment. Check whether the question names a manufacturer, a service, or just a business.
w22 P12 Q4(e).
Delivery removes location dependency
Do not assume relocating always loses customers. A manufacturer selling to retailers, or a firm selling online, delivers to customers who never visit — they are not tied to the site, so relocation need not lose them. Only customers who visit in person, such as a cafe or salon, are location-dependent. Check whether the case says customers collect, or receive deliveries.
s22 P23 Q2(b).
A percentage is not a majority
Read location data carefully. If 40% of customers come from nearby offices, offices are NOT the majority — the other 60% come from elsewhere, so a decision based on "most customers are office workers" is wrong. Quote the figure, then interpret what it actually shows about where customers come from before drawing any conclusion about where to locate.
s22 P23 Q2(b).
The ideal site may be ruled out by law
The cheapest or most convenient site is not automatically available. Planning permission may be refused, zoning may reserve the area for housing, and environmental rules may forbid the use. A site with no industrial-zone designation can be blocked or delayed however low its rent. Factor legal controls and compliance costs into the decision, not just rent and transport.
Cheap labour abroad needs a caveat
Lower wages abroad cut the variable cost per unit only if the workforce has the skills and productivity the business needs. "Locate abroad because labour is cheap" is incomplete — unskilled labour can raise reject rates and training costs, offsetting the saving. Pair the wage advantage with the skills, productivity and infrastructure caveat.
Recommend = judgement in context
For "Recommend and justify" or "Do you think...?", name the location AND explain why the decisive factor outweighs the alternative for this firm (its product, market, labour needs). A decision with no reason, or a two-sided answer with no decision, misses the AO4 marks.
Avoid mirror arguments
"Site A has better infrastructure and Site B has worse infrastructure" is one point, credited once — not two. A genuine second point needs a different factor or a different mechanism. Spot the mirrored pair and add a fresh reason instead of restating the same idea in reverse.
Analyse a factor, do not just name it
Analysis marks need a chain, not a label. "Good infrastructure" is knowledge; "good roads cut delivery time and cost, so the firm keeps its retailer orders and margins" is analysis. Take each factor from knowledge to mechanism to consequence for the named firm.
Match factors to the business named
Read what the question names — a manufacturer, a service business, or just a business — and choose factors that fit. A factory answer leads on inputs and logistics; a shop answer leads on footfall. The wrong set of factors wastes time and earns nothing for application.
Where a business locates affects its costs, the quality of its inputs, and its access to customers. A poor location can raise costs or reduce sales permanently, so the location decision is a major strategic choice.
| Factor | Why it affects the location decision |
|---|---|
| Proximity to raw materials | Bulky or heavy inputs are expensive to transport — a steel plant locates near an iron-ore mine to cut transport cost |
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