Where to establish an enterprise is also to be decided in advance. An enterprise established at a particular location cannot be shifted to other location easily. Decision regarding location of the business unit consists of decision regarding the choice of locality and selection of site. The deciding factors are nearness to the source of supply of raw material, nearness to the market, availability of labour, transportation and banking facilities. Selection of the site depends on cost of land, development cost, etc.
In case of a manufacturing unit the factors that determine location are:
Nearness to the source of raw material particularly when the cost of transporting the raw material is high and these are bulky or heavy in relation to their value. Examples of such raw materials are timber, sugar cane, jute, iron ore, etc.
Availability of rail or road transport facilities. This will make it convenient to bring raw materials to the factory and transporting finished goods to the market.
Availability of banking, postal and other communication facilities. Business cannot be run smoothly without communication with buyers and suppliers. Banks help in transmitting money which is necessary to receive payments and make payments
Adequate supply of power and water is another requirement of a enterprise. Availability of power and water is also a deciding factor.
Nearness to the market, particularly when the finished product is expensive to carry because of its bulk, weight and perishability.
Availability of labour at low cost and at ease is also a factor to be kept in view while deciding the location.
In case of a trading business, the best location is the main market area of a commercial city or town. It should have its own godowns preferably near the railway station. There should be enough scope of selling the products.
Participants