Location of industry is the most important decision to be taken before setting
up of a business or expansion of an existing business.
Different
locations are suitable for different firms due to different reason. Since they
are affecting the firms cost of production it is considered as an
important decision of the entrepreneur.
There
are many factors which influence the
firm’s choice of location.
a)
Availability of cheap land: - It
is the most important influence on the choice of location. Some firms
take advantages of natural factors available [Such as oil refinery require land
near oil field, ship building near water ways and so on]
b)
Access to raw materials: - Some
industries process heavy, bulky raw materials which are costly to transport,
but the products generally weigh much less than the raw materials.
c)
Transport facilities:
- Many firms assemble finished products from parts and components
manufactured by several different firms located in different parts of the
country. So transport links play a great part in choosing the location of
the firm most of the firms chose to locate
d)
Nearness to market: - A location
near the major markets will reduce the cost of transporting the product.
Products which are heavy or bulky in relation to their value will also tend to
be produced near to their market in order to reduce the cost [brewing,
brick making, etc.]
e)
Nearness to supply of labour: -
Firms are interested to locate to an area where there is surplus supply of
labour, which will in turn affect the costs of labour [Although trade unions
negotiate national wage rate, there will be significant differences in the
average earnings in different regions.]
f)
Nearness to other firms (Regional
specialisation):- when firms producing same or similar products are
localised, each can enjoy the advantages of external economies of scale which
is also known as economies of concentration. [Well known examples are ship
building at Belfast, cotton industry at Lancashire and steel at Sheffield in U
K.]
g)
Supply of power: -
Now a day’s firms locate an area where electricity, gas and oil [In the early
days coal was the main source of energy and firms locate near coal fields]
h)
Favourite place: - Certain
locations are preferred by the entrepreneurs for their personal reasons.
i)
Factors affected by other people, firms
and government: - Government’s influence on location of industries
either because of public or of other firms is another factor which influences
the location.
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