The location of businesses Essay Example for Free

The location of businesses Essay Businesses can choose where to locate. Sometimes choice of location is critical. In other cases it is less important. What is the difference? And what happens when a right choice suddenly becomes a wrong choice? Factors influencing location Every business locates where it thinks it will be successful. If you remember that businesses need:   staff to work there   raw materials to produce finished products * customers   to keep their costs as low as possible then their reasons for choosing a particular location begin to make sense. Local labour supply All organizations need to be able to employ staff. So it makes sense to locate where people live. A factory in a remote part of the Scottish Highlands would have trouble finding anyone to work there. Motorway service stations have to pay to transport their staff from local towns and villages to the station itself, a cost which other businesses can avoid. The factors which influence a particular area are often local skills and cost of labour. Local skills In some parts of the country particular skills are a tradition. If you wanted to set up a business making pottery you would be sensible to locate in the Midlands, around Stoke-On-Trent. If you wanted to make cutlery, then Sheffield is the place. If you were making boots or shoes then Northamptonshire is the area for you. Probably the most famous examples today are in the United States. Silicon Valley and Seattle are renowned for their computer industries, so this is where whiz-kid programmers head for. California is the home of the film industry, so if you were keen to work on special effects and digital technology, this is where you would go. Britains Silicon Valley is located along the M4. The area is also famous for Formula One motor racing firms. Scotland has its own Silicon Glen and Cambridge is building a reputation for and is now known as Silicon Fen. Firms wanting to specialize in these particular industries know that if they locate in these areas they will be able to recruit staff with skills they need. The City Of London is renowned for its financial skills and expertise, so this is where you would find large international banks, stockbrokers and insurance firms. Other firms dont need particular skills or maybe willing to train unskilled staff. Firms doing light assembly work often locate where there is a ready supply of cheap (often female) labour. Many of these have set up where traditional industries, such as mining, have closed. Areas with high unemployment have lower wage rates the competition for jobs keeps wage rates down. At the north of Celynen Colliery in Wales, Aiwa employs 1,000 people making videos and in the Rhondda Valley the heart of the old Welsh mining industry Taxdata employs 250 people making CD packaging. In the Dearne Valley in South Yorkshire, at a former colliery, over 2,000 people work for Ventura part of the Next group companies. Ventura is a call centre and mail-handling company which handles over seven million customer accounts for various clients such as Cellnet and the Cooperative bank. Call centres employ operators equipped with a computer and telephone whose task is to answer telephone enquiries or telephone existing or potential customers to generate more sales for companies. Today approximately 150,000 people in the UK work in call centres. Most of these are located in parts of the country where wage rates are lower. However, in some places, such as Tyneside, Leeds and Glasgow, where many call centres have been set up, competition for experienced is now increasing and pay rates are rising. So the pool of skilled labour in the area is affecting the cost for firms. The cost of labour will always be more important to businesses that are more labour intensive than those which are capital intensive. A labour intensive is one which needs a higher number of staff such as call centres or schools and colleges. A capital intensive business is one where machines or technology do most of the work as in a modern electricity generating plant. Here the cost of labour is less important in the choice of location. The Cost of Premises The cost of premises is determined by the forces of demand and supply. The greater the demand for premises and the fewer there are available the higher the cost. For that purpose, premises in city centres especially in London are much more expensive than the cost of premises in the suburbs or in the regions. For example, the lease of a large store (60,000 square feet) in Oxford Street, London, was on sale for i 12,000,000 in 1997! This is because Oxford Street is a prime site in a town a large high street store would be less but not cheap. In 1997, Mark Spencer bought 19 high street stores from Littlewoods for i 192,500,000, paying over the odds for the stores it wanted. They were actually valued at around i 80,000,000. Premises on major town centre shopping routes are always more expensive than on secondary side streets simply because shoppers stay on the high street. Areas of high employment with a surplus of skilled labour Newbury, in Berkshire, is a typical example are more expensive places to locate than areas where unemployment is high and the area depressed, as in some parts of the north east. The result is that companies that have no reason to locate in London or the south east will move to other towns and cities. Those businesses which arent dependant on passing trade will locate outside town and city centres in cheaper areas or on industrial estates. Within Britain, many local authorities offer packages to encourage businesses to locate in their area. They may offer financial assistance for large firms and reduced rents for small enterprises. Specialist rental and leasing companies will offer attractive packages enabling businesses to locate easily in special workspace sites, office complexes, business or retail centres. Some centres are managed with a central reception area, business services and shared meeting rooms. Retail units may be available on short-term license agreements, payable weekly. All these attract organizations to locate where costs will be lowest and where, hopefully, they will be able to expand their business without substantially increasing their costs. Financial Help from the Government If you live in London, south-east, or the east of England (e. g. Norwich), then you live in an officially prosperous area. If you live anywhere else, the situation is different, although in Scotland, Northern-Ireland, the West-Midlands and the south-west, prosperity rose above the UK average between 1986 and 1996. However the north-east, north-west, Yorkshire and Humberside, the East-Midlands and Wales all declined below the national average. The European Union and the government are concerned about such inequalities. They would like all regions to be equally prosperous. For some time in the UK there have been assisted areas. These are areas of Britain where regional aid may be given under European Community law. Regional Selective Assistance (RSA) is the main form of such an aid in Britain. This is a discretionary grant awarded to support a project which will stimulate employment opportunities, increase regional competitiveness and improve prosperity. Between 1985 and 1988, the scheme created 100,000 jobs, reducing employment by 0. 5 per cent in the Assisted Areas, at a cost of i 130,000,000 a year. In 1998 the European guidelines on regional aid changed and all member states were asked to propose new Assisted Areas to operate from 1st January 2000. In July 1999 the Department of Trade and Industry put forward the new proposals which included the following.   Tier One (maximum) assistance for Cornwall, Merseyside, South-Yorkshire and West-Wales and the Valleys. Here grants of up to 40 per cent of the project cost will be available. The government has also proposed that Northern Ireland be treated as an exceptional case for assistance. Tier Two assistance for areas most in need of employment creation, investment and regeneration. For these areas a 20 per cent assistance grant will be available. This includes the Highlands and Islands and various areas in England, Wales and Scotland. Rather than designate towns or cities the government has used ward boundaries (which denote voting areas).   Tier Three assistance for Enterprise Grant Areas where assistance will be available to businesses employing up to 250 people. The aim is to encourage the development of small businesses as these are seen as vital for improving employment and prosperity long term. Once the new Assisted Areas have been agreed by the European Commission, they will remain in force from 1st January 2000 to 31st December 2006. Transport Links for Suppliers and Distribution.