Business location

The choice of where to run a business is a strategic decision that affects costs, revenue and customer access. Edexcel 1BS0 specifies six factors plus the influence of the Internet.

Factors influencing location

1. Proximity to the market

Businesses that rely on physical customers (cafes, hairdressers, gyms) need to be near their target market. High-footfall locations such as town centres or retail parks generate more passing trade but cost more in rent.

2. Proximity to labour

Businesses requiring skilled workers locate where that labour is available. Tech firms cluster in Cambridge, London and Manchester; financial services in the City of London. A regional skills shortage can force relocation.

3. Proximity to materials/suppliers

Manufacturers need raw materials cheaply. Bakeries locate near flour mills; steel plants near coal/iron historically. Reduced transport costs and faster lead times justify proximity.

4. Proximity to competitors

Two effects:

• Cluster benefit — being near competitors can attract customers (Hatton Garden jewellers, Saville Row tailors). Customers comparison-shop in one trip.
• Avoid saturation — too many similar businesses split the local market thinly.

5. Rent and rates

Rent is the monthly/annual cost paid to a landlord. Business rates are tax paid to local authorities based on rateable value. Both vary dramatically — a high-street shop in central London can cost 10x a unit in a regional retail park. Start-ups often choose secondary locations to keep fixed costs low.

6. Transport links

Roads, motorways, ports and rail affect how easily goods reach customers and suppliers. E-commerce warehouses cluster near M1/M6 corridors; ports drive logistics businesses.

Influence of the Internet on location

The rise of e-commerce has reduced the importance of physical location for many businesses:

• Online-only businesses can operate from any location — including the entrepreneur's home — slashing rent and rates.
• Customers can buy from anywhere, so proximity to market matters less.
• A village-based artisan business can sell globally via Etsy, Shopify or Amazon Marketplace.
• However: fulfilment (warehouse near transport hubs) and digital infrastructure (broadband, hosting) matter more than ever.

Edexcel exam tip

When evaluating a location decision, identify the 2–3 most relevant factors for the specific business and ignore irrelevant ones. A web designer does not need passing trade; a sandwich shop does.