Edexcel IGCSE Business 1.4 Decisions on Location PDF

Edexcel iGCSE Business Unit 1: Business activity and influences on business Topic 1.4 Decisions on location From Edexcel Factors influencing business location: proximity to: market labour materials competitors nature of the business activity the impact of the...

Edexcel iGCSE Business Unit 1: Business activity and influences on business Topic 1.4 Decisions on location From Edexcel Factors influencing business location: proximity to: market labour materials competitors nature of the business activity the impact of the internet on location decisions: e-commerce and/or fixed premises Legal controls and trade blocs Lesson objectives To be able to identify factors influencing business location To be able to discuss the impact of the internet on location To explain how legal controls and trade blocs can influence a business location decision Starter Where do you think the best place to set up a café is? ❑Main high street near lots of shoppers ❑A sleepy village high street ❑On an industrial estate ❑Next to a busy road Proximity to: market labour materials competitors Location and type of goods The location will depend on the type of goods: bulky or perishable goods manufacturers need to be close to their customers as the goods can’t go long distance Consumer goods manufacturers can reduce the costs of transport by locating close to customers Proximity to market Location close to customer traffic is important as its good for the customers (convenience) and good for the business as it may need more sales There may be other services nearby that will be useful for the businesses employees Children’s nurseries Shops and services for employees Start-up location and industry type The start-up location depends of the type of business and the industry it’s in Entrepreneur may decide: To work from home To start from a market stall Helen Ellis started the Gourmet Pizza To open an online business Company in Nottingham. She located on an industrial estate close There is less risk if the to where her kids business starts small and were dropped off by the school bus. then grows http://www.gourmetchocolatepizza.co.uk/ Start up location example Levis Roots started his sauce business from his kitchen. He made the sauce at home and sold it to the food stalls at the Notting Hill Carnival Suggested activity – proximity to labour Proximity to labour – what industry do you think these areas known for? Devon Cornwall Scotland If you are not sure carry out some internet research Proximity to labour In the UK we make a variety of Birmingham, (cars) different products, and over time Glasgow (shipbuilding) certain areas have begun to Manchester (textiles) specialise in certain types of Newcastle (shipbuilding and steel) production Nottingham (clothes, medicine) For example Nottingham was Sheffield (steel and steel products) known for its lace and Sunderland (shipbuilding and Manchester for its textiles coal-mining) Again over time the labour force Leeds (textiles and engineering) in the area gains skills in these Belfast (shipbuilding and textiles) industries which makes it very Cardiff (steel) attractive for other similar industries to set up there , as there will be plenty of labour with Can you create a map of the UK the right skills available. and mark on the various skills? Proximity to materials A business start-up will need to think about its location in terms The Denby Pottery of proximity to materials factory – why is the factory The closer a business can be to located in Denby the raw materials it needs for Derbyshire – what production the lower the costs is there? of production will be Proximity to competitors Some businesses choose to locate in a certain area which is known for their products E.g. Birmingham jewellery quarter This will draw customers to a certain area and if they don’t find the product they are looking for in one shop they may try another close by This is the cluster concept Video Nature of the business activity Retail A retail business will want to locate close to where shoppers go They will look for good parking They will need to consider the rent or rates that they will need to pay on the shops Think about your local high street, Rents in the shopping is there a variety of shops? Do you centres will be higher have a shopping centre nearby? What would the additional benefit of being in a centre be? Service A service business may need to locate close to customers, but might not need a premises For example a gardener may work from home, but will need to travel to their customers Services rely heavily on people and so may look to locate close to a good supply of labour Manufacturing Businesses that produce goods will look to locate close to good transport links such as roads, ports and airports Manufacturers may need to locate close to a good supply of skilled labour Businesses may choose to setup in a certain location because a government grant is available e.g. Toyota Derby Watch some clips of inside the factory BBC series here Key terminology Greenfield site Brownfield site Previously undeveloped areas of Areas of land that were once used land, usually on the outskirts of for urban development towns/cities The impact of the internet, legal controls and trade blocs on location decisions Impact of the Internet on location The rise of the Internet business now means that some new start up businesses may change where they trade For example, a business owner can have a market stall and hand out cards for his website Business owners can now work from home and run an internet business Platforms such as eBay, Etsy and Amazon mean even people with basic IT and business skills can run their own start-up Impact of legal controls on location Govt (local and national) can exert some influence. Restricting development (when there is already congestion). Minimising impact a business may have on local community (eg petrochemical plant in a national park, Heathrow flight restrictions) Encouraging manufacturers to locate in areas of high unemployment (eg Nissan in Sunderland) Giving financial incentives (low rents, tax breaks, grants etc) Attracting foreign manufacturers into the country (inward investment) Easiest way to exert influence is via strict planning controls Large-scale business operations may take a long time before planning permission is given. E.g. airports, power stations, chemical plants Because: There will be a consultation period (discussion with stakeholders) And a viability study (how the business will work, how much it will cost, what income is likely) All of this could mean many years of delays for businesses. Impact of trade blocs on location A trade bloc is a group of countries in the same region that join together and enjoy trade free of barriers E.g. EU, GCC, ASEAN Being a member will reduce business costs (fewer or no import taxes). Businesses often locate into a country within a trade bloc to avoid trade barriers (such as import taxes - tariffs). E.g. Nissan producing in the UK Sample Exam Questions 1. An area of ground that was once used for urban development is called: A. Brownfield site B. Enterprise zone C. Science park D. Greenfield site 2. Which of the following factors is likely to be most important when choosing a location for a supermarket? A Proximity to suppliers B Low-cost land C Exchange rate D Energy costs 3. Which of the following businesses is likely to have the most choice when deciding upon a suitable location to base their operations? A. Coal burning power station B. Diamond mine C. High street fashion retailer D. An online tutor service 4. Which of the following is a likely reason for a manufacturer to relocate its business? A To provide space for expansion B To set up an online operation C To avoid higher interest payments D To avoid having to market its products Sample question 1 Answer question 1 Case study for question 2 Sample question 2 How to level question 2