2. 1.5 Choosing the Location of the Business 1 S TARTING A B USINESS 1.5 L OCATION Do football club nicknames tell us anything about what the area is famous for? Match each club to its nickname and state the reason ClubNicknameReason? Northampton TownThe Blades West Ham UnitedThe Tractor Boys Sheffield UnitedPotters EvertonThe Cobblers Stoke CityThe Minster Men Ipswich TownThe Hammers York CityToffees

3. 1.5 C HOOSING THE L OCATION OF THE B USINESS  In this topic you will learn about  Factors influencing start-up location decisions 1.5 L OCATION

4. F ACTORS INFLUENCING START - UP LOCATION DECISIONS In this section you need to understand the factors influencing where a business is located. The location factors should include: 1. The availability of raw materials 2. Transport 3. Labour 4. Competition/other businesses 5. Technology 6. Proximity to the market 7. Costs A rather unusual location! What factors contributed towards Ben’s choice of location?

5. 1.5 L OCATION F ACTORS INFLUENCING START - UP LOCATION DECISIONS The availability of raw materials Some firms depend upon certain raw materials for their product. Firms often base themselves close to the raw material to reduce costs. This particularly affects manufacturing firms. Raw Materials are the physical inputs that go into producing a good or providing a service. Whether a firm chooses to locate close to its raw materials or close to its customer can depend upon whether it is bulk gaining or bulk reducing. Can you explain what these 2 terms mean?

6. 1.5 L OCATION F ACTORS INFLUENCING START - UP LOCATION DECISIONS Transport The local infrastructure will include transport links such as roads, railways and airports. Start-up businesses will need access to good transport links in order to provide their good or service. If customers find it difficult to access a firm they will go elsewhere. The significance of transport will depend on the nature of the business. Businesses that do not rely on face to face contact might be able to set up anywhere, even a remote location. On the other hand, a retailer needs access to customers in order to succeed. Where would you locate? You are a manufacturer exporting finished goods to France You are a warehouse supplying retailers across the UK You are an internet retailer selling computer parts

7. 1.5 L OCATION F ACTORS INFLUENCING START - UP LOCATION DECISIONS Labour There needs to be an adequate supply of labour. The local labour force must have the appropriate skills e.g. finance in London and Leeds. The needs of the start-up will depend upon the nature of the product – the more specialised and skilled the product, the harder the task of recruiting a qualified workforce.

8. 1.5 L OCATION F ACTORS INFLUENCING START - UP LOCATION DECISIONS Competition/other businesses A lack of competition in an area provides an incentive for a start-up business – is there a gap in the market? Other businesses can provide a support mechanism - banks, recruitment agencies and IT services Where do you live? Is there a gap in the market for a business or a product? Is there the need for: nursery care, a nightclub, video shop, an Italian restaurant? What business can you think of? Why?

9. 1.5 L OCATION F ACTORS INFLUENCING START - UP LOCATION DECISIONS Competition/other businesses Would you choose to locate close to your competitors or far away? In each of the following circumstances choose near or far and justify your choice. BusinessNear or far?Justification A car showroom A convenience store A shoe shop A travel agent A taxi rank An Indian restaurant A seaside B&B What are the advantages and disadvantages of choosing a location famous for a particular product or service?

10. 1.5 L OCATION F ACTORS INFLUENCING START - UP LOCATION DECISIONS Technology Technology includes forms of communication and information provision through such mediums as the personal computer, the Internet, fax and mobile phones. New technology allows the start-up business to communicate with customers, gathering, processing and sending information through, for example, the Internet Can you unscramble these advances due to new technology? LAKE RAVING TRIM A INTERLOCKING SOW REALIGN TIE RESENTING THIN POP

11. 1.5 L OCATION F ACTORS INFLUENCING START - UP LOCATION DECISIONS Proximity to the market The significance of the market to a firm’s location decision will depend upon the nature of the business. Many service sector businesses must be in an area where there is a large footfall. Restaurants, salons and newsagents need to be in areas where the customers are. These are often town centres. If the start-up business is a supplier to a larger firm it will wish to be as close to that business as possible. Team Time In teams either draw or print off a map of your closest village, town or city centre. Locate on your map where you would locate the following new businesses: a Chinese restaurant and take away a card and gifts shop a hand car washa newspaper stand a cash and carry wholesalersa barber shop Present and justify your decisions to the rest of the class.

12. 1.5 L OCATION F ACTORS INFLUENCING START - UP LOCATION DECISIONS Costs A start-up business faces a number of costs: Cost of premises. Most start-up businesses will remain in the geographical area in which they live Town centres are more expensive than out of town areas. For this reason, many firms will choose to locate away from the town centre or even at home Labour costs. Often, a firm might employ young people on minimum wages to try to keep these costs down. However, specialist jobs might be more expensive e.g. an accountant or lawyer Costs of premises and labour will vary regionally Sometimes high costs force an industry to relocate abroad. Should the Government give tax breaks to UK animators?

13. C OST OF LOCATIONS ?  Monopoly – is it just a board game or a lesson in business?  Why does Old Kent Road cost less than Mayfair?  Can you put these colours from a monopoly board in order from cheapest to most expensive? 1.5 L OCATION What factors influence the cost of different locations?

14. C HOOSING THE LOCATION 1.5 L OCATION Sam and Peter have worked for a firm of local estate agents since leaving college three years ago. Frustrated by doing all the hard work and seeing relatively low salaries they have decided to leave the comfort of paid employment and go it alone. They are setting up a new estate agents, “Key Moves”, as a partnership. Sam is keen to find vacant premises on the local high street but Peter suggests they could work from home operating an internet based agency. Question Time 1What is meant by the term ‘partnership’?(2 marks) 2Explain two factors that Sam and Peter should consider when choosing a location.(4 marks) 3Explain one advantage and one disadvantage of operating as an internet based agency.(6 marks)

15. 30 S ECOND T EST End List 7 factors that influence location decisions 1. 2. 3. 4. 5. 6. 7.

16. U NIT 1 S TARTING A BUSINESS  You have now completed the first section of the course – Starting a Business  During this time you will have learnt a lot of new terminology, it is a good idea to write a glossary of key terms.  See how many technical terms you can think of under each heading  1.1 Starting Business Enterprise  1.2 Setting Business Objectives  1.3 Business Planning  1.4 Legal Structure  1.5 Location  Use your notes to ensure you have a complete list and then write a short definition for each one 1.5 L OCATION