- Created by: Sophie Chanoch
- Created on: 12-11-12 19:12
The location of a start up business plays a major role in its future success or failure.
There are factors which can influence the choice of location for abusiness.
The ideal location should aim to maximise the profits while keeping the cost and expenses of the business to a minimum.
The market availability is a concern for businesses looking to start a business.
Without the customers there's no business. Hence choosing a location with the best market audience is a winning formula.
Costs, Technology and Infrastructure
Business start ups consider the cost, technology and infrastructure of a location when they're deciding where to set up their new venture. Costs are inevitable in business and the idea is to keep it low.
Technology is vital and enables the business to keep up the pace in its competitive marketplace.
Infrastructure creats strong incentives for a business to have its base in a particular location.
Push and Pull
A series of factors are known to push and pull businesses towards or away from certain locations. Cost, technology and infrastructure can be either push or pull factors.
A push factor will motivate the business to be more aggressive and competitive.
Pull factors are incentives that attract the business to certain areas.
Push cost factors include high overhead expenses like office rent and congestion charges, pull cost factors include low labour costs, government led initiatives like low cost loans and subsidised rent.
Push technology factors include non availability of broadband services while an example of a pull technology factor is the excellent communication and network systems in a location due to high concentration of technology businesses. Hence the benefits to the business are immense and affordable.
Push infrastructural factors include poor transportation links and low power supply. Pull infrastructural factors include excellent support services and communication systems.
Factors that affect Location
Factors that affect the location of a business include:
- the workforce, the business needs to have access to the best and highly skilled employees
- land, affordability of rent, scarcity and high property prices affect the choice of land
- raw materials, this will reduce the costs of travelling to the source of the resource, it's time efficient.
- proximity to the market, the distance to the target is very important, it reduces transportation costs and enhances the quality of the products, with goods that have short shelf life duration it's a smart idea for the business to be close to the target market for its produce.
Despite the above factors already mentioned, there are businesses that are not particularly affected by push-pull factors.
These include mobile businesses that supply intangible goods, online business that do not require a physical location and businesses that remain in a location regardless of the degenerative conditions of the area over a period of time- called industrial inertia.
The consumer needs to be given the optimum choice benefits when situating a business.
With fierce competitions for consumers, businesses need to differentiate themselves and one way of such is in location.
Where high street shops and major supermarket chains fail to thrive, the corner shops excel because they meet the needs of a market that aren't prepared to travel far distances to the chain stores.
These convenience stores satisfy the demands of such consumers who are happy to pay a higher price for products in shops very close to them.
Business start ups are greatly motivated by the level of support by the government. The government makes certain areas more appealing to start up businesses.Such areas can be called enterprise zones, regeneration areas and assisted areas.
To stimulate the growth of businesses in such areas, the government invests numerous resources and gives grants to new businesses looking to get established in those specific areas. These forms of assistance include grants, lower rent incentives and interested free loans.
There are nine regional development areas in the United Kingdom which have the responsibility for: Promotion of business entrepreneurial activities, provision of training for the local workforce, job creation, enhancement of business efficiency.
Through the European union and British Government backed finance initiatives, business are able to utilise financial tools and resources that are available to them.
Governments tend to dissuade businesses from location on farmlands however, it's proactive about assisting businesses to locate and build new premises in derelict areas, former factory sites and unused lands.
These are factors which the businesses take into consideration that don't revolve around finance and money. It has more to do with the other benefits like social, moral, environmental, expansion and local amenities.
Where the quality of life is of a high standard, it will attract new business. Availability of shops, restaurants, entertainment and leisure facilities are factors which the entrepreneur will take into consideration.
Areas that are environmentally friendly are highly desirable. With the need for responsibility of businesses to the environment, it will encourage such start ups to be situated in an area that takes environmental friendliness very seriously.
Areas with low crime rate are essential. This is because it reduces risks of theft, burglaries and other unwarranted risks which are bad for both the business and the market. These areas tend to keep customers away because of fear and intimidation by unruly individual.
Expansion of the business is part of every new enterprise's growth plan. It'll be attracted to an area that will stimulate business growth.
Local amenities that are essential for businesses are very important. Communication, support services, broadband services, network support, infrastructural facilities always encourage establishment of new businesses.