Page 238 - Cambridge IGCSE Business Studies

Cambridge IGCSE Business Studies Section 4 Operations management

EXPLORE! Quantitative factors

Quantitative factors can be measured in financial terms and will directly aff ect the
Use library resources or the

costs, revenues and profitability of a site.
internet to investigate the help
that the government in your
country provides to encourage
businesses to locate in particular
Quantitative factor Explanation
areas. Can you find examples
of businesses that have located Cost of site How expensive the land or buildings are to rent or buy.
in a particular area because of
Labour costs What is the average wage paid to workers in the area? This
government incentives?
will be influenced by the supply of workers, the skill level
required and competitors for the labour concerned.
Transport costs How close to suppliers is the proposed site and what will
be the cost of transporting goods to and from the site? How
TOP TIP
easy is it for customers to access/reach the location? This is
Don’t give two examples of particularly important for service industries such as retail
the same type of factor. For outlets, hotels, cinemas, etc.
example, water, power and
Market potential Revenue from sales might depend heavily on the location.
telecommunications are all
For example restaurants, supermarkets and other tertiary
support services, so mentioning
sector businesses will often need to be close to their

two of these will only be credited
customers. Clearly, it is less important for secondary sector
once.
businesses to be located so close to their customers.
Government Both local and national governments will oft en provide
incentives financial and other incentives to encourage businesses to
KEY TERM
locate in a particular area. These incentives can significantly
reduce set-up costs.
Government incentives:
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usually finance such as interest
Table 18.1 Quantitative factors that influence business location decisions
free loans, or grants provided to a
business to help when locating in
a country or area of a country.
Qualitative factors
In addition to the quantitative factors outlined above, businesses need to also
consider qualitative factors in their decision-making process such as those outlined
in Table 18.2.

Qualitative factor Explanation

The size of the available site Not only does the site need to be large enough for the current needs of the business, but it

might be important that it offers scope for expansion in the future.
Legal restrictions In most countries it is not possible for a business to simply locate where it wants to. There may
be planning restrictions or other legal restrictions that prevent location in certain areas, or
close to other community amenities. For example, it would be unlikely that a manufacturing
business would be allowed to locate very close to an area for residential housing because of
the effect noise and air pollution might have on residents.

Quality of local infrastructure How good are transport links such as road, rail, air and sea? Does the location have good
support services such as water, power and telecommunications?
Ethical issues and concerns If a business is relocating from one part of the country to another, or from one country to

another, how will this affect their existing workforce? The decision to relocate might lead to
the redundancy of existing workers and could damage the reputation of the business among
consumers – this could lead to reduced sales, revenue and profits.

Table 18.2 Qualitative factors that influence business location decisions