Factors Influencing the Location of Small-Scale Business


By: Site Engineer, Staff

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Some factors are paramount in influencing the location of the business. A good entrepreneur should take note of these major factors before locating his business because any business that misses this basic foundation will suffer for it.

These factors are:

1. Socio-Cultural Factors

These play a lot of role in locating a business. The entrepreneur should take into consideration certain socio-cultural factors like the norms and tradition of the people, the infrastructural facilities such as pipe born water, good roads, and constant electricity supply. Equally to be noted is the religious traditions of the people where the business is expected to be located.

2. Geographical Factors

Given the facts that different areas are blessed differently, the entrepreneur should exploit the comparative advantage of that geographical area when locating his business.

3. Personal Factors

In locating a business, each entrepreneur has his values, dos and don’ts in mind before embarking on the business. With constant strikes, riot, and tensions nation-wide, some entrepreneurs must have made up their minds about where to locate their business and where not to locate them. Some of these personal factors influence greatly the location of business by the entrepreneurs.

4. Economic Factors

When choosing a location for business, the entrepreneur must look at certain factors like the purchasing power of the target audience, and the competitive power of the target audience. Any serious entrepreneur must view economic factors very seriously because money is one of the mainstays of any business.

Depending on the type of business the entrepreneur should take advantage of the available economic factors-available before the final allocation.

5. Specific Factors

There are other specific factors apart from the above general factors that the location of business depending on the nature of the business.

These specific factors related to the line of business, which the entrepreneur may find himself establishing, thus:

Service Business

The entrepreneur should, first of all, take a decision on what type of service business he is into; it is the type of service business that determines the location.

Good and assessable location is very germane for the location of the business for example; schools, clinic, and restaurants are good or better to be in highly populated neighborhoods.

Manufacturing Business

The manufacturing business is best located in an area that has the best advantages of a minimal combination of cost of production and distribution.

Some important specific factors that should influence overall location decision which include:

1. Nearness to the market

2. Nearness to the suppliers

3. Availability and cost of labor

4. Availability and cost of infrastructure; power supply, telephone service, good road network, closeness to railways where haulage of raw materials and finished products will be cheaper by rail, closeness to ports for easy shipping and receiving of goods if the firs are involved in the exportation of goods etc.

5. Enough land for the building of factory, parking facilities and for expansion when the need arises.

6. Accessibility to the site. There should be less traffic congestion to the factory site. This is because of the need for ease of movement of the factory trucks where available.

7. Federal, state and local government authority’s regulations and taxes.

8. Transportation service and cost.

Retail Business

Similarly, the entrepreneur should take care of certain factors when locating his retail business. Some retail stores do well when sited near certain other types of retail stores.

Examples of such businesses are:

  • Men’s and women’s apparels and variety shops are commonly located near departmental stores.
  • Restaurants, barbing shops, candy; tobacco and jewelry stores are often found near theatres.
  • Florists are usually grouped with shoe stores and women’s clothing stores.
  • Drug stores may be found in any of the above groupings.
  • Paint, home furnishing, and furniture stores are generally in close proximity to each other.

Wholesale Business

It is always better for a wholesaler to site his business in an area where there is a heavy concentration of the retailers he supplies. At the time he may equally have some other retailers located in suburban areas. In this case, he can select a site at the outskirts of the needs of both the city and suburban customers.

The entrepreneur should know that these factors enumerated above should not be taken for granted when a business is to be sited, as they are paramount in ensuring the success of the business.


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