IBBusinessDPBusiness ManagementSLRevision Notes5. Operations Management 5.3 LocationChoosing a Production Location

Choosing a Production Location (DP IB Business Management)

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Lisa Eades

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Factors Influencing the Production Location

  • Choosing a good production location can have significant impacts on a business.

  • A range of factors influence the location a business chooses for production

Diagram: factors affecting business location

Factors influencing the business location include proximity to suppliers, proximity to labour, proximity to customers, the level of infrastructure and the nature of the business activity
Production locations are affected by multiple factors and if a business chooses the wrong location, it can fail

Factors Influencing Choice of Production Location

Factor

Explanation

Proximity to the market

  • Refers to the distance between the business location and the target market

  • Locating near the market reduces transportation costs and increases its accessibility to potential customers

Proximity to labour

  •  Refers to the availability of qualified and skilled workers in the area

  • Businesses often locate in areas with a high concentration of skilled labour to ensure that they have access to the necessary workforce to run their operations efficiently

Proximity to materials

  • Refers to the availability of raw materials and supplies needed for the business which will help to minimise transportation costs

Proximity to competitors

  • May be desired (or not) to take advantage of a shared customer base or to differentiate themselves by offering unique products or services

The nature of the business activity

  • Different types of businesses have different requirements in terms of space, infrastructure, and accessibility

    • E.g. A manufacturing plant may require a large space for equipment and a loading dock for shipping and receiving goods, while a service business such as a law firm may require less space and more accessible office locations

Infrastructure

  • Includes transport and electronic networks that allow for products to be supplied either physically or online

  • Online businesses rely on a fast and reliable internet connection

  • Good transport links provided by major trunk roads and efficient rail links are particularly important for businesses that require an effective logistics network

    • E.g. An online fashion retailer will gain a competitive advantage if it is able to deliver products quickly to customers so the location of its distribution hub is likely to be close to the motorway network

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Lisa Eades

Author: Lisa Eades

Lisa has taught A Level, GCSE, BTEC and IBDP Business for over 20 years and is a senior Examiner for Edexcel. Lisa has been a successful Head of Department in Kent and has offered private Business tuition to students across the UK. Lisa loves to create imaginative and accessible resources which engage learners and build their passion for the subject.