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Edexcel IGCSE Business Your notes

Decisions on Location
Contents
The Importance of Business Location
The Impact of the Internet on Location Decisions
Legal Factors & Location

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The Importance of Business Location

Your notes
Factors Affecting the Choice of Business Location
Business location is where a business establishes and runs its operations
Some businesses operate from a single location where it combines production, administration,
sales and logistics
Others distribute operations across multiple locations to take advantage of factors such as wage
costs, skill availability and levels of taxation
Remote businesses may not operate from any single location
They use online technologies to link dispersed staff and resources

Diagram: The Factors Affecting the Choice of Business Location

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Businesses consider factors such as proximity to the market, labour, suppliers and competitors when
choosing a suitable location
Your notes
In many cases, businesses remain in the location in which they were initially set up
Business owners want to remain loyal to the communities in which their business were able to grow
Moving the business could involve significant upheaval and affect business continuity
Incentives may be available to remain operating in a particular location, e.g. subsidies, grants or
tax benefits
Explanation of Factors Influencing the Choice of Business Location

Factor Explanation Examples

Proximity to the Distance between the business location A luxury car dealership may
market and the target market locate its showroom in a wealthy
city suburb
Locating near the market reduces
transportation costs and increases
accessibility to potential customers

Proximity to Availability of qualified and skilled A high-tech manufacturer may

labour workers in the area locate in a region where similar
firms already operate to access
Locating where there is a high workers with relevant skills
concentration of skilled labour gives
access to the necessary workforce to run
business operations efficiently

Proximity to Availability of raw materials and supplies A brewery may be located close
materials needed for the business to a reliable water source to
ensure a continuous, high-
Locating close to key resources helps quality supply of a key
minimise transportation costs ingredient

Proximity to Take advantage of a shared customer A designer clothing retailer may

competition base or differentiate the business by be located in the fashion district
offering unique products or services of a major city

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Nature of Businesses have varying space, A factory may require a large

business infrastructure and accessibility needs space for equipment and a
Your notes
activity loading dock for shipping and
Businesses that sell products to other receiving goods
businesses (B2B) are less likely to need
prominent locations, e.g. in shopping
malls, than businesses that sell to
consumers (B2C)

Infrastructure Location close to major road or rail A law firm may require central
networks allows businesses to receive office locations with good
supplies and distribute products access to public transport
Good transport links are attractive to
potential employees

Examiner Tips and Tricks

You may be asked to analyse factors that determine the choice of location for a given business. You
should consider those factors listed above and you must ensure that you relate your answer to the
business in the question. This is the skill of application and it is required in all longer responses.

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The Impact of the Internet on Location Decisions

Your notes
E-commerce & Location Decisions
E-commerce involves the buying and selling of goods and services online
Some businesses sell goods online as well as operate physical stores
Small businesses have the ability to reach international customers by selling products online
E-commerce has grown significantly in recent decades

Graph: E-commerce Sales Growth in some Countries in 2023

E-commerce sales grew significantly in 2023, requiring many businesses to reconsider their location
needs
(Source: Statista)

Factors for E-commerce stores to consider

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Lower business costs

Business costs are likely to be reduced as smaller premises in lower-profile areas are usually cheaper Your notes
to rent or buy
High-profile premises are less important than for physical stores as they do not rely on foot traffic

Cost and availability of labour

Businesses with remote workers may only require a small hub, with workers requiring online access
Experienced call centre and sales staff may be needed

Proximity to transport infrastructure

Products ordered online need to be delivered efficiently to customers
Location close to highways, rail networks or logistics partners is a key consideration

Reliable IT infrastructure and power

Remote workers need to have access to good communications infrastructure, such as high-speed
broadband, in their homes
Businesses in areas prone to power outages may struggle to maintain their online services
Many governments are prioritising the improvement of communication systems
E.g. Sweden’s national broadband plan aims for all households and businesses to have access to
high-speed broadband by 2025

Examiner Tips and Tricks

You could be asked to outline a benefit of e-commerce to a particular business. Outline questions
require you to use the business context in your answer. A useful structure is to state A benefit,
Business Reason, Consequence, or A → B → C.

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Legal Factors & Location

Your notes
The Impact of Law on Business Location
Laws are rules created by the government of a country with the aim of regulating the actions of its
citizens and businesses
Regulation is the process of enforcing the laws that have been created and ensuring that
businesses abide by them
Governments and local authorities can incentivise businesses to locate in particular areas
In areas of high unemployment or industrial decline grants or reduced tax rates may be offered to
businesses that create jobs or improve communities
In some cases, businesses are deterred from locating in particular areas
E.g. In areas of outstanding natural beauty, strict bylaws or city ordinances may regulate the type
of business activity that is permitted
E.g. A country with strict environmental laws might not be an attractive location for a
manufacturing company that produces a lot of waste
The presence or absence of laws can affect a businesses choice of location in two ways

1. Less economically developed countries

Less economically developed countries often have fewer laws and less enforcement of their existing
laws, which is likely to be attractive to some businesses
Businesses enjoy lower costs as they have to meet fewer legal requirements, such as safe
handling of waste material
Labour can be paid very low rates as no minimum wages exists
Employees and customers have less opportunity to pursue legal action

2. More economically developed countries

Developed economies with extensive laws can be attractive to businesses who desire to locate in
region with
Good infrastructure
Highly-skilled workers
High standards of living

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Laws and their Impact on Location

Type of Law Areas of Impact Examples Your notes

Employment Pay & conditions In Norway employees have a legal right to

law generous overtime pay and benefit from
Equal treatment regardless generous periods of parental leave
of characteristics such as
gender, race and disability
Employment contracts
Trade union rights

Environmental Emissions Since 2019, German businesses have been

law required to accept the return of all unwanted
Storage and disposal of product packaging from customers
waste
Storing and handling
hazardous substances
Packaging
Water usage

Consumer law Descriptions of products To tackle rising levels of obesity in Brazil, the
government introduced a law banning the
Right to refund or advertisement and sales promotion of ultra-
replacement processed food products
Product safety
Advertising & sales
promotion
Selling credit products

The Influence of Trade Blocs on Business Location

A trading bloc is a group of countries that come together and agree to reduce or eliminate any
barriers to trade that exist between them
There are different levels of economic integration ranging from relatively low integration in a
bilateral agreement to high integration in a monetary union, e.g. the Eurozone
Globally, there were more than 420 regional trade agreements in effect in 2022
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Each subsequent type of trading bloc has increased levels of economic integration
Examples of trade blocs include the EU (European Union), USMCA (United States, Mexico, Canada) and
ASEAN (Association of Southeast Asian Nations) Your notes

Diagram: Major Trade Blocs in 2023

Major trade blocs include the EU, ASEAN and NAFTA

A free trade area is a bloc in which countries agree to abolish trade restrictions between themselves
but maintain their own restrictions with other countries

Diagram: How a Free Trade Area Trading Bloc Works

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Your notes

Mexico, Canada and the USA have a free trade agreement but can deal individually with Cuba as they
see fit
In the diagram above, Mexico, Canada and the USA have reduced or eliminated many trade
restrictions between themselves
The USA refuses to trade with Cuba and has placed a complete ban on all exports/imports to Cuba
Canada trades with Cuba but imposes tariffs on all imports
Mexico trades freely with Cuba
Businesses may look to locate their operations in a trade bloc country in order to avoid paying tariffs
or other restrictions such as quotas

Examiner Tips and Tricks

Trade blocs and other trading arrangements are often in the news. Using contemporary examples in
your longer answers can improve their quality and support your analysis by giving it more depth.

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