20

Location decisions
Revision answers
1 Advantages: more control over manufacture; raw materials and components
may have to be exported as well, thus increasing costs; no need to recruit and/or
train new employees; there may be strict planning regulations to comply with in
the other country.
2 Customer demand may be different; different climate; competition; cultural or
religious differences.
3 Any two from the following:
i) Closeness to the market or raw materials.
ii) Availability of power and water.
iii) Availability of government grants.
iv) Transport links.
v) Availability and wage rates of skilled labour.
vi) Costs of site.
(The importance of each factor needs to be discussed to gain extra marks.)
4 Whether the finished product is bulky to transport or whether the raw
materials/components are more expensive to transport need to be considered in
determining where the cheapest place to locate the factory would be.
5 Brief explanation of the importance of any six of the following:
i) Market
ii) Raw materials/components
iii) Availability of labour
iv) Government influence
v) Transport and communication
vi) Power
vii) Water supply
viii) Climate
ix) Cost of site
6 Discussion of factors such as: will customers come specifically to the shop or do
they want passing trade; rent paid on the shop; availability of vacant premises,
location of local competition.
7 Discussion of factors such as: where the business customers are located;
available vacant premises; availability of skilled employees; rent/taxes on the
property; technology available.
8 Discussion of factors such as: primary sector businesses do not need to be near
customers whereas service sector businesses may need to provide a personal
service and have direct access to customers; primary sector will be governed by
nature – suitable farming land or where the minerals are found; service sector
will need to consider its customer needs much more and possibly where other
businesses are located.
9 Discussion of factors such as: no need to locate near customers; need to be able
to access postal services; warehouse space required; good transport network;
good internet link.
10 Examples:
i) To encourage/discourage foreign investment.
ii) To stop/encourage businesses locating in certain areas, for example, it would
encourage businesses to locate in areas of high unemployment.
iii) To regulate pollution.

Cambridge IGCSE Business Studies 4th edition Teacher’s CD © Hodder & Stoughton Ltd 2013 1
 20 Location decisions

Answers to activities
Activity 20.1
a) Factors: market, availability of water, raw materials, transport and
communication, availability of skilled labour, power.
b) Raw materials or availability of water are likely to be the most important to the
location decision.

Activity 20.2
a) and b)
Electrician, discussion of: needs to be near to local customers; personal preference
of owner; rent/taxes on premises; possibly availability of labour; competition from
other electricians.
Computer software firm, discussion of: personal preference of owners; customers
do not need direct contact; availability of labour; rent/taxes on premises; possibly
technology.
Scuba training centre, discussion of: needs direct contact with customers; needs
to be sited near suitable dive sites where the customers will go; near to other
businesses, such as in holiday resorts; climate; rent/taxes on premises; personal
preference of owners.

Activity 20.3
a) Student’s own answer.
b) The additional information might be rent of the shops, taxes to pay, male/female
ratio, competition.

Activity 20.4
Student’s own answer in correct report format.

Activity 20.5
a) Local community and residents; suppliers; customers; government; workers.
b) Local residents: likely to oppose danger from new plant and extra traffic it may
cause.
Suppliers: will support it as it could lead to additional orders from DEF.
Workers: likely to support it as there should be additional chances of
employment.
Customers: likely to support it as it may lead to lower prices if the plant is
efficient.
Government: will need to consider all of the wider employment and
environmental issues before deciding.
c) Three reasons: may wish to encourage creation of new jobs; may want to see
additional exports from the country; may wish to control the exact location and
method of manufacture to protect the environment.

Cambridge IGCSE Business Studies 4th edition Teacher’s CD © Hodder & Stoughton Ltd 2013 2
 20 Location decisions

Sample answers to Paper 1 style questions

(with mark annotations for Question 2)
1 a) To move the business to another location.
b) i) Local fruit farms are cheaper.
ii) Lower transport costs.
iii) Fresh fruit produce.
c) i) Location of the fruit farms, so that the raw materials are readily available.
ii) Large amounts of waste, so may be cheaper to transport finished product
than the raw material.
iii) Land chosen; cost to purchase.
iv) Market nearby, so fruit juice sold in the home market as well as abroad.
v) Sea ports, to export some of the output.
d) i) Skilled labour already nearby: no need to recruit and train new fruit juice
workers, so this is cheaper.
ii) Production of fruit juice would stop, as when the existing factory is closed
there may be a delay before the new production can start and so sales of
fruit juice may be lost.
iii) Fruit grown locally so there is a ready supply of raw materials grown locally
so transport costs lower; would need to find new supplies and would need
to build up new relationship with suppliers.
e) Yes, because it will be cheaper as grants will not have to be repaid; labour
costs might be lower.
No, because it may not be the best location for other reasons, for example,
further from main local markets or sea ports for export.
Overall conclusion/judgement needed.
2 a) Competitors of a business are other businesses in the same industry or a
similar industry which sell similar products or services. [2K]
b) i) Fewer shops competing with them.
ii) Regular customers, as it may be too far to travel into city. [2App]
c) i) Planning regulations in city centres which restrict where SalesRUS can
locate their new shop. [1K; 1App]
ii) Grants to locate the shop in a particular area which has high unemployment
in order to provide retailing jobs for local people. [1K; 1App]
d) i) A busy shopping mall will mean that lots of customers visit the mall and
may use the SalesRUS shop; this may mean it will sell more clothes and
possibly increase profits. [1K; 1App; 1An]
ii) High rent paid for the shop in a busy area such as a shopping mall will
mean that costs are higher than a less busy area such as the edge of the
city; this may mean that profits are lower unless sales of clothes are much
higher to cover these costs. [1K; 1App; 1An]
e) Yes: it will increase the competition and may mean the shop loses sales to
these other clothes shops if they charge lower prices or sell a wider range of
clothes.
No: customers might want to go to the area as there are several clothes
shops to visit and may be more likely to buy clothes from the SalesRUS shop,
resulting in sales being higher.
Student’s overall conclusion. [1K; 1App; 2An] + [2Eval]

Cambridge IGCSE Business Studies 4th edition Teacher’s CD © Hodder & Stoughton Ltd 2013 3
 20 Location decisions

Answers to revision test

 1 3)
 2 4)
 3 1)
 4 2)
 5 1)
 6 3)
 7 2)
 8 1)
 9 4)
10 3)
11 1)
12 2)
13 1)
14 3)
15 3)
16 4)

Cambridge IGCSE Business Studies 4th edition Teacher’s CD © Hodder & Stoughton Ltd 2013 4