Component 1: Business location — Eduqas A-Level Business
Test yourself on Component 1: Business location with EDUQAS A-Level practice questions.
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Component 1: Business location explained
Site choice is long term, costly and hard to reverse, so treat it as an investment appraisal rather than a list.
Read the full explanation
Quantify first: compare annual fixed costs at each site, covering rent per square metre, business rates and local wage rates, then recompute break even output as fixed costs divided by contribution per unit and see which site needs the lower sales volume. Weigh nearness to the market against nearness to bulky raw materials, since transport cost falls on whichever side loses most weight in production. Add labour supply and skills, transport infrastructure, planning permission, competitor clustering and government incentives such as freeport status. Qualitative influences, including the owner's own preference and the image an address carries, often settle small firm decisions even when the numbers point elsewhere.
Analyse these factors in relation to the needs of the business
Siting decisions only earn marks once each influence is ranked against what one named firm actually requires, so the skill is to tie every influence to that firm's cost structure, customers and operating model rather than to list influences in the abstract. A bulk reducing manufacturer such as a steel mill sits close to raw materials to cut inbound freight, while a coffee shop pays a high rent per square metre to buy footfall, because revenue is selling price multiplied by quantity and quantity here is passing trade. Useful tools are a weighted scoring table, the break-even output at each site and a cost per unit comparison. The trade-off is nearly always cheap space against access to customers or skilled labour, and a grant or business rates relief can tip a marginal case without changing underlying demand.
Evaluate the choice of different locations for a new business
Here the task is judgement between shortlisted sites, not description of each one, so set criteria first, weight them for a start-up whose priority is survival and cash flow, then decide. Evidence that carries a judgement includes contribution per unit at each site, the break-even volume implied by each rent, and the payback period on fit-out spending, calculated as the initial outlay divided by annual net cash inflow. Reversibility matters as much as cost: a long lease or a bespoke unit is expensive to unwind, while a market stall, a pop-up or an online-only launch keeps fixed costs low and options open. Strong answers close with the condition under which the recommendation would change, such as a footfall forecast proving optimistic or a grant being withdrawn.
Your focus
- Explain the factors that need to be considered when locating a new business
- Analyse these factors in relation to the needs of the business
- Evaluate the choice of different locations for a new business
Component 1: Business location exam tips
Marking Points
- Separate what can be costed, such as rent, rates and wages, from judgements such as the owner's preference, and say which dominates for this firm.
- Do the arithmetic when figures are given: fixed costs divided by contribution per unit gives break even output in units, and the site with the lower break even carries less risk.
- Use the nature of the product to justify the pull, since bulky low value inputs pull production towards materials while bulky or perishable output pulls it towards customers.
- Apply to the named business, for example a coffee shop needing footfall or a distribution depot needing motorway access, rather than one generic list.
- Credit comes from pairing a named influence with a named need: transport links matter to a firm with perishable stock, footfall matters to a retailer whose sales are passing trade, broadband and courier access matter to an online seller.
- Quantify wherever the case allows it, comparing annual rent, local wage rates, business rates or delivery cost per unit across sites instead of asserting that one site is cheaper.
- Build chains of reasoning: lower rural rent cuts fixed costs, which lowers the break-even output, which makes the site viable at a lower forecast volume of sales.
- Separate the measurable influences such as rent, rates, wages and grants from the qualitative ones such as the local skills pool, brand image and owner preference, and say which this firm should weight more heavily and why.
- A stated decision that names one site and says which criterion it wins on for this firm's objectives, rather than a summary of both options.
- Criteria stated and weighted, for example survival and liquidity in the first trading year outranking long-run expansion room when finance is tight.
- Comparative use of data: break-even output, contribution per unit or payback on the fit-out at each site, quoted and compared rather than described.
- Qualification of the judgement with risk, reversibility and timescale, including what would have to change for the other site to win.
Examiner Tips
- 💡Numerical questions here usually hide a break even or payback comparison, so label your units, either units of output or months taken to repay.
- 💡When the command is recommend, name the site in the first line of the conclusion and then justify it against the criterion you set.
- 💡Use the business's own objectives, such as fast growth or low risk, as the tie breaker when two sites cost about the same.
- 💡This is usually set as an analyse task of roughly six to ten marks on a named start-up in the case study, so pull case data such as rent figures, population or competitor numbers into every paragraph.
- 💡Two developed chains beat five undeveloped assertions, so finish each chain with an effect on profit, cash flow or capacity.
- 💡If the stem supplies numbers, do the arithmetic even when the command word is analyse, because quantified reasoning is what lifts an answer into the top band.
- 💡Evaluate tasks here carry the heaviest tariff in this part of the specification, often twelve to twenty marks, and around half of those marks reward judgement rather than content.
- 💡Use a visible structure: criteria, evidence for each site, decision, then the main risk to that decision.
- 💡Justify and recommend are asked in the same way, so answer both by naming the option, the criterion and the circumstances that would change your mind.
Common Mistakes
- Choosing the cheapest site without checking whether it can generate the sales, so the low rent is paid for in lost revenue.
- Mixing an annual rent figure into one site comparison and a monthly figure into another, which makes the comparison meaningless.
- Treating the decision as easily reversed, when leases, fitting out costs and recruitment make relocation slow and expensive.
- Listing generic influences such as near to customers and good transport with no link to the firm's product, customers or costs, which keeps the answer inside the knowledge marks.
- Treating the lowest rent as automatically best and ignoring the revenue lost from weaker footfall or a smaller catchment.
- Mixing up the cost consequences: moving site changes rent, which is fixed, but it can also change delivery cost per unit, which is variable, and both belong in the reasoning.
- Writing two separate descriptions of two sites and stopping, with no comparison and no decision, which caps the answer well below the evaluation band.
- Offering a verdict only in the final line, with no criteria behind it, so the judgement reads as an afterthought.
- Ignoring how hard the decision is to undo, treating a long lease on a fitted unit as no riskier than a monthly licence on a shared space.