Decisions on location

The most repeated loss is failing to apply a correct point to the named firm. On a State or Outline item, a generic advantage like 'near suppliers cuts transport costs' earns the knowledge mark but not the application (AO2) mark unless tied to a specific extract detail. Naming the firm is not enough — add a scenario fact (e.g. the heavy steel frames it moves).

Two different factors that often pull in opposite directions. Proximity to the market = near the customers who buy the product; proximity to raw materials = near the inputs used to make it. A fresh-bread bakery locates near customers; a steel-frame maker near its heavy supplier. Writing 'near the market so raw materials are cheaper' muddles the two.

Rent or the price of premises/land is a fixed cost — paid whatever the business produces or sells — not a variable cost. A high-rent site raises fixed costs, so the firm must be sure the location brings in enough extra revenue (e.g. footfall) to cover it. Mislabelling it as variable also breaks break-even and profit reasoning.

No factor is decisive for every business — the best site depends on the nature of the firm: does it need customers (market), workers (labour), inputs (raw materials) or despatch links (infrastructure)? Assuming footfall always matters loses marks when the firm is an online retailer or a no-visitor factory. Decide first what THIS business most needs.

Proximity to raw materials is not automatic. A firm whose FINISHED product is bulky, fragile or perishable may instead locate near the market, to cut the cost or risk of moving finished goods. A bulk-reducing firm (heavy inputs, lighter output) sits near raw materials; one with bulky output sits near the market. Which is costlier to move — inputs or output?

A common misconception is picking the cheapest premises, treating location as cost-cutting alone. The best site balances cost against revenue. A cheap out-of-town unit saves rent but for a shop can slash footfall and sales, so profit falls despite lower costs. Conversely, a costly high-footfall site is wasted on an online firm. Location is a judgement, not arithmetic.