Answer:
Location plays a pivotal role in development of business for both manufacturing and service industry. There are many factors which are directly affect the decisions related to the strategy of business.
Few of them are briefly discussed.
1. Competition
The competition especially in service and retail industry is primarily dependent on location. If you are the only player in the locality then you can have competitive advantage over others. Also some firms prefer the clustering strategy and select location where competition is fierce.
2. Labor
The labor in most of the manufacturing industries will be from local neighborhood and if the business require labor intensive with particular skills, the location will definitely affect the strategic decisions.
3. Logistics
Manufacturing industries are mainly dependent on the inbound logistics as they will supply raw materials and will be converted into products. The proximity of the raw materials plays in important role while deciding the location of a business.
4. Political Risk
If the location where a firm wants to operate has political risks involved, it definitely will consider other option. Thus it also plays an important role for selecting the location.
5. Community
The ethnicity and overall demography of the community can affect the performance of the business and thus must be accounted for while developing a business strategy.
6. Taxation and Government Policies
Some governments have developed industrial states and zones where tax rebates are offered and industries are clustered with better infrastructure. Thus it also becomes an important factor to be considered.
These are some of the factors which affect the location strategy.
Importance of having location strategy
As it is evident from the above mentioned factors that location strategy can play an important role in deciding what kind of business a firm is looking into and how it will be done. Also location strategy becomes important because it has many factors which will affect the unit cost of the product being manufactured. The pricing and marketing strategy will also depend on the location.
Therefore, almost all the functions of a business are affected by the location strategy which makes it important to develop after careful analysis.