Skip to main content
EnglandBusinessSyllabus dot point

What decides where a business locates, and what goes into a business plan?

The factors that influence where a business locates (proximity to market, labour, materials and competitors, and cost), the purpose and main contents of a business plan, and how planning supports a new business.

A focused answer to AQA GCSE Business 3.1.5 and 3.1.6, covering the factors that influence business location, the purpose of a business plan, and the main sections a plan should contain.

Generated by Claude Opus 4.87 min answer

Reviewed by: AI editorial process; not yet individually human-reviewed

Have a quick question? Jump to the Q&A page

Jump to a section
  1. What this dot point is asking
  2. Factors affecting location
  3. The business plan
  4. What a business plan contains
  5. Try this

What this dot point is asking

AQA wants you to explain the factors that influence where a business chooses to locate, describe what a business plan is for, and list the main sections a business plan contains.

Factors affecting location

The right balance of these factors depends on the type of business. A retailer or service business (a cafe, a hairdresser) lives or dies by footfall, so proximity to the market dominates and a high rent in a busy spot can be worth paying. A bulky manufacturer leans toward cheap land and nearness to materials, accepting a site away from customers because the goods are delivered. A service that needs specialist staff (a software firm) prioritises the availability of skilled labour, often clustering near universities or cities. Proximity to competitors cuts both ways: clustering can draw shared customers (think of car dealerships on the same road), but it also intensifies price competition.

The internet has reduced the importance of location for many firms, because an online business can reach customers anywhere and may only need a cheap warehouse rather than a high-street shop. This is why e-commerce sellers often locate near transport links and distribution hubs rather than near customers, since delivery speed and warehousing cost now matter more than shop frontage.

The business plan

A business plan helps the owner clarify the idea, set targets, spot risks in advance and, crucially, raise finance, because banks and investors want to see a plan before lending money. The plan forces the entrepreneur to research the market and put numbers to the idea (a sales forecast and a cash-flow forecast), which turns a vague hope into a testable proposal. It then becomes a benchmark: the owner can compare actual sales and costs against the plan and adjust if reality differs.

What a business plan contains

Try this

Q1. State two factors that influence where a business locates. [2 marks]

  • Cue. For example, proximity to the market and the cost of the site.

Q2. Explain one reason a new business writes a business plan. [2 marks]

  • Cue. To help raise finance from a bank, because lenders want to see a thought-through plan.

Exam-style practice questions

Practice questions written in the style of AQA exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.

AQA 20193 marksExplain one factor a manufacturing business should consider when choosing its location. (Paper 1, Section B)
Show worked answer →

A 3-mark explain question: one factor developed through a chain.

For example, proximity to raw materials. A manufacturer that uses heavy or bulky inputs (such as steel or timber) will want to locate near its suppliers, because transporting heavy materials a long way is expensive. The consequence is lower transport costs, which keeps total costs down and protects the profit margin.

Markers reward one factor extended by a reason and a consequence. Other valid factors: availability and cost of labour, proximity to the market, and the cost of the site. A bare list of factors caps at one mark.

AQA 20219 marksAn entrepreneur is seeking a bank loan to open a new gym. Justify the importance of a business plan to the entrepreneur when applying for the loan. (Paper 1, Section C)
Show worked answer →

A 9-mark justify question: argue the importance, apply to the gym, and acknowledge a limit.

A business plan is important because it shows the bank the idea has been thought through: it sets out the target market, the marketing mix, the costs and, crucially, a cash-flow forecast and sales forecast. This evidence reduces the lender's perceived risk, making the bank more likely to approve the loan. Application: a gym needs costly equipment upfront, so the bank will want to see how the entrepreneur expects membership income to cover repayments.

Acknowledge a limit: a plan is only a forecast and cannot guarantee success, so the bank also looks at the entrepreneur's experience and security. A supported judgement might conclude the plan is essential but not sufficient on its own. Markers reward developed reasoning applied to the gym, with a judgement.

Related dot points

Sources & how we know this