Question

This question is about Chapter 8 Location Strategies. What are the 7 factors that affect location decisions and what do they mean?

Answer 1

Location decisions are the critical decisions taken to decide and choose the correct location for your plant. The 7 factors determining the same are:

1. facilities: This factor would check if the location is feasible or not and various facilities are available like how much distance from the customers or organisations etc are considered here.

2. competition: This factor talks about the decisions taken by your main competitors's. Many a times a firm doesn't choose a location because of their competitor's. Thus, action of your competitiors are important as well.

3. logistics: This factor talks about the logistics and the movement of the goods to the location and by the location. Is transportation and warehousing facility easily available there to help in movement of goods or not.

4. labor: This factor talks about the labour. Is labour or working people are available at that location or not and if yes, are they having the right skills to work or not.

5. community and site: This factor talks about the community and the people living around at the location. Your decision would highly be imfluenced by the location's customs, cultures and people living around as you should follow the cultural norms.

6. political risk: This factor talks about the political risks which are being present or not with the location. Is tax benefit very high or low and what other political regulations and rules have to be followed to take the right decision.

7. incentives: At last, this factor talks about the extra benefits being provided at the facility. For example government grants you loan and subsidies when you open a firm in rural areas to promote the industrialisation. Thus, the benefits you are having also affect your decision.