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Business location

General objective: Low cost - high revenue = high profit

Influences

Special factors:

Special industries need
→ water source for waste disposal or cooling
→ the right climate for the production of a good
→ a location near the source of raw materials (weight-losing industries, e.g. coal, copper, forest industries, sugar mills
→ a location near the market for a good (weight- or bulk-gaining industries, which produce final products that are heavier or bulkier than the raw materials, usually by addition of some ubiquitous raw material such as water, e.g. beer industry)

Footlose industries

→ gain no particular advantage from any one location, usually because transport costs are the same for each site or very low

Business location factors may be split up into 4 categories:

Such location factors may be:

Quantitative factors

Fixed costs:

Variable costs

Qualitative factors

Market-side factors

Additional factors for international location decisions

Location factors may also be separated into push factors (e.g. rising competition in an area, rising costs, poor communications systems, falling demand) and pull factors (e.g. government incentives, low labour costs, good communication systems, developing markets)

1 Non-tariff barriers may be:
  • state subsidies/ownership
  • national regulations on health, safety, employment
  • product classification
  • patents, copyright
  • quotas
  • bribery, corruption
  • technical barriers: specifications on size, shape, design, functions, performance, production
  • labelling (also: manuals, instructions)
2 e.g. Japanese companies building plants in the EU to help overcome the Common External Tarif

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Letzte Änderung: 08.05.2011