Wednesday 9 May 2012

Business location decisions

In the news Style Garden Centre were looking to set up their business and as the family has operated businesses in the past knew the importance of location in deciding where to site their new business enterprise. The eventually chose a site which was an old run down nursery.  There was enough space for future expansion on the 7 acre sight.  The A4050 which bordered the site is one of the busiest roads in Wales.  The location was attractive as it was on the main road to Cardiff which was a few minutes away and the local Airport and was conveniently placed for passing trade.  
Despite the site having housed a nursery before, much had to be done to update it to attract customers.  The new company would need to invest £1million to make the transformation of the site.  This involved clearing the land, erecting new buildings and extensive landscaping works including a new frontage and side road leading to the main road.  It was no good having a great location if the garden center did not look attractive and inviting to customers.
The company now employs 25 full and part time staff - most of who were taken on in the past two years to keep pace with expansion.  It plans to double its workforce and the whole site's current £3.5m turnover within five years.  You can see how well its done if you click here  .  

Locating a business Most entrepreneurs start tehir business in the area that they live.  It is one of the most important decisions that they have to make.  Many will choose to run it from their own home in order to keep the costs down.  Others might recognise that to get the best chances of success it may be necessary to move somewhere else.  This may eventually mean moving to a different part of the country or abroad.  The growth of internet shopping has REDUCED the importance of location for many businesses.  The internet has allowed even the smallest business to access a global market.  Items can be bought on line and be delivered by local couriers or the postal service with the cost added to the purchase price and paid for by the customer.  Clearly the internet is not suitable for some businesses or businesses that sell perishable or fragile products. The main factors to consider include:

The market Some businesses have to be located close to their markets especially if the products they sell cost a lot to transport.  Having a local market is important to service providers such as shops as customers will not travel vast distances to go to one particular supermarket when they can use a closer one.  Also a plumber who lived 30 miles away from is main market would spend too long every day travelling

Road system A good road system or infrastructure allows a business to be located further afield.  Time can be saved if a business is located close to major roads or motorways.  Goods can be transported more quickly and customers can reach a business without a big journey.  It is for this reason that many industrial estates and shopping malls are located near to good road systems. 

Available employees a business needs employees so there needs to be suitable people living locally.  If the business needs employees with particular skills, local people should have these skills or they will need to be trained.  If low skilled workers are needed then a suitable number should live within easy reach of the business.  Low skilled workers are less likely to own a car, so they will need a place of work on a bus route or within walking distance. 

Competition Having lots of similar businesses in an area often seems to be a bad thing for a busienss.  Competition tends to bring prices down as one business tries to attract custoemrs from another.  Even so an entrepreneur may wish to set up a business in a location where there are similar other businesses but the product or service must be popular to attract several businesses.  It is possible that one business could survive in the market and take all the customers from newer established operations if they were better

Group activity

  • The location of a business is important as it can make the difference between success and failure
  • When picking a location you need to consider how close customers live, how easy it is to get goods in and out, the level of competition in the area, and whether suitable employees can be obtained.
  • The internet has transformed where businesses are located.  A business can produce a webpage that can be used to attract customers and gain orders.  Buying goods through the internet is becoming increasingly popular.
  • For some entrepreneurs it is more important to operate close to where they live than move to where the business might be more profitable.

Quick Quiz 10 Business location decisions
  1. What is a garden centre?
  2. What is an industrial estate?
  3. What is meant by a market?
  4. What is a courier?
  5. Why do many entrepreneurs prefer to run their businesses from their own homes?
  6. Explain why prices tend to be cheaper when there are several busiensses in an area selling the same goods and services.
  7. How does the closeness of Cardiff help Style Gardens?
  8. Why are some people still reluctant to buy goods on the internet?
  9. Describe how businesses might benefit from being close to an airport?
  10. Explain why many industrial estates are found on the outskirts of towns, rather than the centre of them.

Nine mark questions

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