AQA · GCSE · Business
Course version: 8132 · Version from Sept 2017
Business location: Factors influencing the location decision of a business
Location decisions are influenced by a range of factors that affect costs, revenue and competitiveness.
Checked against the AQA 8132 specification (opens in a new tab) on .
- Point 1 of 2
- 4 key terms
Study notes
From the checked teaching notes for this specification point.
The idea
Location decisions are influenced by a range of factors that affect costs, revenue and competitiveness. Proximity to raw materials reduces transport costs for manufacturers, while proximity to the market is vital for retailers and service businesses. Labour availability and cost, including skills and wage rates, influence where businesses set up. Infrastructure such as transport links, broadband and utilities affects efficiency. Government incentives, such as grants or enterprise zones, can attract businesses. The nature of the business, whether online or physical, also matters: an e-commerce business may locate near distribution networks rather than customers. Other factors include competition, climate, and personal reasons of the owner. Businesses weigh these factors against objectives such as profit maximisation or growth.
What earns the marks
- Identify and explain at least three factors that influence location, such as proximity to market, labour supply and government incentives.
- Explain how a specific factor affects costs or revenues, for example locating near raw materials reduces transport costs.
- Apply location factors to a given business context, such as a restaurant choosing a town centre site for footfall.
- Analyse the trade-offs between different location factors, for example lower rent in a rural area versus reduced customer access.
- Evaluate which location factor is most important for a particular business and justify the choice.
Common mistakes and how to put them right
Listing factors without explaining their impact on the business.
Put it right: Link each factor to costs, revenues or competitiveness.
Assuming all businesses prioritise the same factor.
Put it right: A manufacturer may prioritise raw materials, while a retailer prioritises footfall.
Ignoring the growth of online businesses.
Put it right: Consider how e-commerce reduces the importance of physical location for some firms.
Exam tips
- Use the business context provided in the question to select the most relevant location factors.
- When evaluating, compare factors and justify why one outweighs others for the specific business.
- Include examples of real or hypothetical businesses to illustrate your points.
Try the lesson
The start of the Business location: Factors influencing the location decision of a business lesson, made from checked teaching notes for this specification point.
Have a go first
Which of the following businesses is most likely to locate near to its source of raw materials?
Listen
Location decisions are influenced by a range of factors that affect costs, revenue and competitiveness. Proximity to raw materials reduces transport costs for manufacturers, while proximity to the market is vital for retailers and service businesses. Labour availability and cost, including skills and wage rates, influence where businesses set up. Infrastructure such as transport links, broadband and utilities affects efficiency. Government incentives, such as grants or enterprise zones, can attract businesses. The nature of the business, whether online or physical, also matters: an e-commerce business may locate near distribution networks rather than customers. Other factors include competition, climate, and personal reasons of the owner. Businesses weigh these factors against objectives such as profit maximisation or growth. A strong answer earns marks for these points. Identify and explain at least three factors that influence location, such as proximity to market, labour supply and government incentives. Explain how a specific factor affects costs or revenues, for example locating near raw materials reduces transport costs. Apply location factors to a given business context, such as a restaurant choosing a town centre site for footfall. Analyse the trade-offs between different location factors, for example lower rent in a rural area versus reduced customer access. A common slip: Listing factors without explaining their impact on the business. Instead, link each factor to costs, revenues or competitiveness. Exam tip: Use the business context provided in the question to select the most relevant location factors.
See it
Key words
Say what each word means before you turn the card.
Location factors
Try answering aloud or in your head before turning the card.
Costs and revenues
Try answering aloud or in your head before turning the card.
Business objectives
Try answering aloud or in your head before turning the card.
Competitiveness
Try answering aloud or in your head before turning the card.
See every definition
- Location factors
- Influences on where a business decides to set up, affecting its costs, revenue and competitiveness.
- Costs and revenues
- The expenses a business incurs and the income it receives, which location factors can affect.
- Business objectives
- Goals such as profit maximisation or growth against which businesses weigh location factors.
- Competitiveness
- How well a business can compete, which location factors can affect.
Label the diagram
Some boxes have lost their names. Pick the right name for each number.
1Box 1
2Box 2
3Box 3
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