Why may a cheap location not be the best location, and why is it costly for...

Why may a cheap location not be the best location, and why is it costly for a small firm to choose a location that is too small?

Expert Solution

For the first question I would like to suggest that even if the location is cheaply available it doesnt mean that it wont affect other monetary factors. For example, it can be locationally connstraint for any raw material receival or finished goods delivery, we might incurr issues with availability of labour and raw material due to location constraints, althought it is cheaply avaialble. So choosing for cheap location is not always the best option.

On the otherhand it is really costly for a firm to choose a location that is too small, because some operating and admin costs are fixed eventhough how small or how big the location may be. At the same time, it will turns out to be highly costly if the company goes for expansion in future, which needed an additional location for the increasing demand. So it is always better to plan a location which is optimal in size keeping in view of the futuristic scenerio.

keosha answered 1 year ago

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