Business location — AQA GCSE Business
Test yourself on Business location with AQA GCSE practice questions.
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Business location explained
Location decisions are influenced by a range of factors that affect costs, revenue and competitiveness.
Read the full explanation
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.
Students should be able to understand the factors that influence where a business is located, including proximity to the market, availability of raw materials, labour, competition and costs.
Location decisions affect costs, revenue and competitiveness. Proximity to the market reduces transport time and cost, important for perishable goods or bulky items; for example, a bakery near customers lowers delivery costs. Availability of raw materials matters for manufacturers: a quarry must be near suitable rock. Labour availability means recruiting suitably skilled workers at acceptable wage rates; a software firm may locate near a university. Competition influences location: too many rivals can reduce market share, but clustering can attract customers. Costs include rent, business rates, wages and transport; a low-cost location may be rural, but may increase delivery times. Businesses weigh these factors against each other, and the importance of each factor varies by industry and scale.
Your focus
- Identify and describe factors that influence business location decisions.
- Explain how location factors affect business costs, revenues and competitiveness.
- Evaluate the relative importance of location factors for different types of business.
Show all 6 objectives
- Identify and describe the factors that influence business location.
- Explain how each factor affects a business's costs, revenue or competitiveness.
- Evaluate the relative importance of location factors for different types of business.
Business location exam tips
Marking 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.
- Evaluate which location factor is most important for a particular business and justify the choice.
- Proximity to the market reduces transport costs and delivery times, which is especially important for perishable or bulky products.
- Availability of raw materials is a key factor for businesses whose production depends on heavy or bulky inputs, such as quarries or food processors.
- Labour availability includes the supply of workers with the right skills and the local wage rates the business must pay.
- Competition affects location because a business may avoid areas with many rivals to reduce direct competition, or choose to locate near competitors to benefit from customer footfall.
- Costs include rent, business rates, wages, utilities and transport; a business may choose a cheaper location to reduce fixed and variable costs.
- The relative importance of each factor depends on the type of business, its product and its target market.
Examiner 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.
- 💡Use specific business examples to illustrate each factor, such as a bakery locating near a town centre or a quarry locating near its raw material.
- 💡When discussing costs, distinguish between fixed costs such as rent and variable costs such as transport, and explain how location affects each.
- 💡For higher marks, evaluate the relative importance of factors for a given business context rather than listing them.
Common Mistakes
- Listing factors without explaining their impact on the business; correction: always link each factor to costs, revenues or competitiveness.
- Assuming all businesses prioritise the same factor; correction: a manufacturer may prioritise raw materials, while a retailer prioritises footfall.
- Ignoring the growth of online businesses; correction: consider how e-commerce reduces the importance of physical location for some firms.
- Treating all factors as equally important for every business; instead, explain that a bakery prioritises proximity to market while a quarry prioritises raw materials.
- Confusing labour availability with labour costs; labour availability is about whether suitable workers can be recruited, while labour costs are the wages and related expenses.
- Assuming competition is always a reason to avoid an area; in reality, some businesses locate near competitors to benefit from higher customer footfall.
- Ignoring the trade-offs between factors; for example, a low-rent location may be far from customers, increasing transport costs.