Business location: the factors influencing where a business locates (market, labour, materials, costs, infrastructure), the impact of the internet and e-commerce on location decisions, and how location affects costs and competitiveness.

What this topic is asking

OCR J204 topic 4.5 wants you to know the factors that influence where a business locates (the market, labour, materials, costs and infrastructure), how the internet and e-commerce have changed location decisions, and how location affects costs and competitiveness. The exam often gives a business choosing between sites and asks you to weigh the factors. Paper 2 is synoptic, so location links to finance (costs) and marketing (reaching customers).

The factors influencing location

A business weighs these factors against each other: a prime, high-footfall site costs more in rent, so the extra sales must justify the extra cost. OCR rewards matching the priorities to the type of business.

How different businesses prioritise

The same location is not right for every business: a busy, expensive town centre suits a shop but is wasted on a factory that needs cheap space and good road access.

The impact of the internet and e-commerce

For an online business, a cheap warehouse with good transport and broadband can matter more than a high-street address. This lowers location costs and widens the market, but the business still depends on delivery logistics and good internet infrastructure. Many firms now combine a smaller physical presence with online selling, reducing the importance of a costly prime location.

How location affects costs and competitiveness

Location directly affects costs: rent, business rates, wages and transport all vary by site, and a poorly chosen location can saddle a business with high fixed costs. It also affects competitiveness: a convenient, visible location brings in customers and makes recruiting easier, while a remote or hard-to-reach site can lose both sales and staff. The right location balances cost against access to customers, labour and supplies.

Try this

Q1. State two factors a manufacturer would consider when choosing a location. [2 marks]

• Cue. Any two of space, transport links, availability of labour, nearness to materials, cost of premises.

Q2. A site brings $40{,}000$ monthly sales at a $25\%$ contribution, with rent of $2{,}000$. Calculate the monthly contribution after rent. [2 marks]

• Cue. Contribution $= 40{,}000 \times 0.25 = 10{,}000$; after rent $= 10{,}000 - 2{,}000 = 8{,}000$.