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AS 91379 9 (3.1): Demonstrate understanding of how internal factors interact within a business that operates in a global context. Part E – BUSINESS LOCATION. Businesses need to decide not only what they are going to sell their goods or services, but also where they will sell from.
Part E –
Businesses need to decide not only what they are going to sell their goods or services, but also where they will sell from.
Several small businesses are run from home. These, and firms that sell to national markets or sell via the internet, do not have to consider as many factors about physical location.
A childcare centre, fast food store, insurance business, clothing manufacturer and a landscape gardening business all have different location requirements.
Location decisions are likely to be based on the costs and benefits of specific alternatives
Quantitative Costs and Benefits
These can be measured in financial terms. For example, the high cost of locating a retail business in a Westfield Mall versus the considerable benefit of high foot traffic, seven-day trading and high sales revenue.
Qualitative Costs and Benefits
These are non-monetary in nature. All of the following factors have a financial implications but cost would not be the main issue in making the decision about where to locate the firm.
Multinational companies operate in a number of locations around the world.
Exchange rate fluctuations must be considered.
Businesses trading internationally can experience sudden large movements in exchange rates. Sometimes these are beneficial and sometimes they have a negative impact.
Businesses that have a physical presence that customers can visit, such as shops, are known as ‘bricks and mortar’ businesses. Those that operate online only could be called ‘clicks’ businesses. Of course, some combine face-to-face and online selling. Ezibuy, the NZ seller of clothing and homewares, is a good example of a ‘bricks and clicks’ enterprise.
A cluster is a concentration of similar or same-industry businesses in the same geographical area. The area becomes a destination for customers.
It is not by accident that a furniture store, appliance store, curtaining store and a home décor shop are located together in a commercial centre. The area might even by signposted “Homezone”.