gcse economics - firms - economies of scale

How do businesses decide where to locate? A number of factors are involved. These vary depending on what the business produces e.g. primary, secondary and tertiary

POSSIBLE REASONS FOR CHOOSING A SPECIFIC LOCATION:

• Near to the market (that is its customers)
• Near to raw materials
• Availability of skilled / unskilled labour
• Local pay rates – this could be influenced by unemployment rates
• Cost of land
• Government support e.g. grants
• Transport links

Technology has given businesses far more freedom in recent years. Computer networks, mobile phones and the Internet mean that many service companies can locate away from their customers and other branches. They can communicate through technology or the postal service.

HOW DO INTERNATIONAL BUSINESSES DECIDE WHERE TO LOCATE?

• Cost of workers
• Transport costs / links
• How near is the base to its existing / new customers?
• Is the country in the European Union? (see page )
• Is the country in the European Monetary Union? (see page)

ACTION

a. Think of THREE businesses near you. Why have they located there. Do this for a) Primary sector b) secondary sector c) tertiary sector

b. How can the Government influence where a business locates?

 SMART THINKING

c. What is meant by industrial inertia? Explain why this occurs.

d. What factors might influence a foreign business to locate in the UK?