Pearson Edexcel · GCSE · Business

    Course version: 1BS0 · Version from Sept 2017

    Factors influencing business location: ● proximity to: market, labour,…

    Full specification wording

    Business location: Factors influencing business location: ● proximity to: market, labour, materials and competitors ● nature of the business activity ● the impact of the internet on location decisions: e-commerce and/or fixed premises.

    Choosing a business location requires balancing multiple factors.

    Checked against the Pearson Edexcel 1BS0 specification (opens in a new tab) on .

    • 4 key terms

    Study notes

    From the checked teaching notes for this specification point.

    The idea

    Choosing a business location requires balancing multiple factors. Proximity to the market is vital for retail to ensure high footfall, whereas manufacturing prioritises proximity to raw materials to minimise transport costs. Access to suitable labour ensures the business can hire skilled staff, while proximity to competitors can either be beneficial (creating a shopping hub) or detrimental (losing sales). The nature of the business activity dictates these priorities; a service business needs different premises than a factory. Furthermore, the internet has revolutionised location decisions. E-commerce allows businesses to operate from cheaper, remote warehouses rather than expensive high-street fixed premises, as physical customer access is no longer required.

    What earns the marks

    • Explain how proximity to raw materials reduces transport costs for manufacturing businesses.
    • Analyse why retail businesses often prioritise proximity to the market to maximise customer footfall and sales.
    • Discuss how the nature of the business activity determines whether a fixed high-street premises or an industrial estate is more appropriate.
    • Evaluate the impact of e-commerce on location, specifically how it enables businesses to choose cheaper locations because physical proximity to customers is unnecessary.

    Common mistakes and how to put them right

    • Assuming all businesses need to be close to their customers.

      Put it right: Recognise that manufacturing or e-commerce businesses often prioritise cheaper land or proximity to materials over customer footfall.

    • Stating that being close to competitors is always a disadvantage.

      Put it right: Explain that clustering near competitors can attract a larger pool of customers to the area, benefiting all businesses.

    • Confusing the need for labour with the cost of labour.

      Put it right: Specify whether the location is chosen for access to a large pool of unskilled workers or a specific hub of highly skilled professionals.

    Exam tips

    • Always link the location factor directly to the specific type of business provided in the case study.
    • When discussing e-commerce, contrast the high fixed costs of high-street premises with the lower costs of remote warehousing.
    • Use the concept of transport costs when explaining why a business might locate near its raw materials.

    Try the lesson

    The start of the Business location: Factors influencing business location: ● proximity to: market, labour, materials and competitors ● nature of the business activity ● the impact of the internet on location decisions: e-commerce and/or fixed premises. lesson, made from checked teaching notes for this specification point.

    Have a go first

    A manufacturing business needs to transport heavy, bulky raw materials to its factory. Which factor is most likely to influence its location decision?

    Listen

    Choosing a business location requires balancing multiple factors. Proximity to the market is vital for retail to ensure high footfall, whereas manufacturing prioritises proximity to raw materials to minimise transport costs. Access to suitable labour ensures the business can hire skilled staff, while proximity to competitors can either be beneficial (creating a shopping hub) or detrimental (losing sales). The nature of the business activity dictates these priorities; a service business needs different premises than a factory. Furthermore, the internet has revolutionised location decisions. E-commerce allows businesses to operate from cheaper, remote warehouses rather than expensive high-street fixed premises, as physical customer access is no longer required. A strong answer earns marks for these points. Explain how proximity to raw materials reduces transport costs for manufacturing businesses. Analyse why retail businesses often prioritise proximity to the market to maximise customer footfall and sales. Discuss how the nature of the business activity determines whether a fixed high-street premises or an industrial estate is more appropriate. Evaluate the impact of e-commerce on location, specifically how it enables businesses to choose cheaper locations because physical proximity to customers is unnecessary. A common slip: Assuming all businesses need to be close to their customers. Instead, recognise that manufacturing or e-commerce businesses often prioritise cheaper land or proximity to materials over customer footfall. Exam tip: Always link the location factor directly to the specific type of business provided in the case study.

    See it

    A top-down flowchart. A single top node labelled "Factors influencing business location" branches into six nodes: "Proximity to market", "Proximity to labour", "Proximity to materials", "Proximity to competitors", "Nature of the business activity" and "Impact of the internet". The "Impact of the internet" node then branches into two further nodes: "E-commerce" and "Fixed premises".
    It shows the factors influencing business location, including proximity to market, labour, materials and competitors, the nature of the business activity, and the impact of the internet through e-commerce and fixed premises.

    Key words

    Say what each word means before you turn the card.

    E-commerce

    Try answering aloud or in your head before turning the card.

    Fixed premises

    Try answering aloud or in your head before turning the card.

    Proximity to the market

    Try answering aloud or in your head before turning the card.

    Proximity to raw materials

    Try answering aloud or in your head before turning the card.

    See every definition
    E-commerce
    Selling online, which allows businesses to operate from cheaper, remote warehouses rather than expensive high-street fixed premises, as physical customer access is no longer required.
    Fixed premises
    Physical premises such as a high-street shop, which e-commerce businesses can avoid because physical customer access is no longer required.
    Proximity to the market
    Being close to customers, which is vital for retail to ensure high footfall.
    Proximity to raw materials
    Being close to materials, which manufacturing prioritises to minimise transport costs.

    Label the diagram

    Some boxes have lost their names. Pick the right name for each number.

    The diagram again, with 3 boxes numbered instead of named. A top-down flowchart. A single top node labelled "Factors influencing business location" branches into six nodes: "Proximity to market", "Proximity to labour", "Proximity to materials", "Proximity to competitors", "Nature of the business activity" and "Impact of the internet". The "Impact of the internet" node then branches into two further nodes: "E-commerce" and "Fixed premises".
    • 1Box 1

    • 2Box 2

    • 3Box 3

    0 of 3 labelled

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