One of the most fundamental decisions corporate have to make is the choice on location. This is because choice of an ideal location is vital to a firm’s operation capacity in the overall market. The location decision has been given so much attention by businesses and this essay mainly focuses on the factors that spearhead the choices on investing in a particular location. Globally, companies have been influenced by certain factors to invest in different regions not only by just making investments, but, the nature of business has to vary depending on the markets they are targeting. Finally, this study seeks to analyze the factors that foster investment decisions made in regards to investing in certain locations.
Keywords: Fundamental decisions, ideal location, nature of business
Location is a comprehensive topic in research since it comprises of many factors. A simple definition of location is a place where one opts to carry out particular operations or activities. The hurdle, however, manifests itself when choosing the ideal location for one to conduct these operations. Most organizations while selecting the appropriate business location tend to do a cost-benefit analysis of different alternatives considered. One of the vital factors to consider is the amount of capital needed to start the operations. For almost all sizable corporations, the evaluation of proposed business site includes a systematic consideration of its cost and benefits relative to the alternatives. This essay seeks to analyze the factors that influence decisions on location.
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In previous years, scholars were mainly concerned with the location activities of manufacturing businesses. This was because many firms in the first half of the twentieth century had prioritized production and sales thus firms were able to have a competitive edge by choosing a location where there was low cost of production and high profit maximization. As a result, theorists focused on other factors like access to raw material, cost of transport, costs of labor and market accessibility. Several years down the line, cost has become a fundamental concern for location theorists since a wide range of studies have been conducted to analyze the impact factors such as taxation, financial incentives, civil rights unions, laws on minimum wages and the overall infrastructure have on choice of a location (Kimelberg and Williams, 2013).
Throughout the years, trends have radically changed the process of corporate site selection. Some of these tendencies have made site selection process very difficult and compressed its nature temporarily. Other alterations have brought difficultly in provision of the stage of site selection choice support fostered by its growing significance (Rabianski, Delisle and Carn, 2001).
The emergence of trends like globalization and consolidation, have fostered this complexity in site selection process. These complexities have been magnified by the surfacing of e-business operation which has influenced the site selection process. The tendency towards consolidation has caused ripples across many firms inclusive of corporate stakeholders and real estate service firms. Consolidation has also brought imbalances on the demand side and inevitable surpluses in the real estate sector. These property surpluses can be bothersome to many firms (Rabianski, Delisle and Carn, 2001).
In particular, the important capital rations linked to real estate, the rigid character of many leases and the lack of liquidity in the nature of investments make it hard to deduct capacity in a limited period of time. In spite of this situation, many corporate real estate sections find themselves tied by a strong obligation to reduce costs in a relatively short period of time. This is mostly confirmed where consolidations include competitors of a firm with economies of scale being a key factor behind the choice (Rabianski, Delisle and Carn, 2001).
Globalization is the second factor in the continuing trend that can comparatively relate to consolidation. Globalization has contributed to making site selection decision more difficult and significant to firms. Although not all firms are claimants to the global label, the tendency has been invasive, distressing most sectors, business firms, capital and consumer markets, either in a direct or indirect way. In the case of an influx of a number of companies actively operating in the global arena, the site selection process takes on a rising complexity. For these firms, workplace and other real estate fundamentals ought to be managed in a scope that is broader and has more diversity than in the previous periods. Not only are corporate activities difficult, but also business activities, policies and cultures must be reconciled. In addition, real estate sections must learn to tackle a wide of new laws and regulations that impact on ownership, development process and leasing operations of corporate facilities. In the case of firms that are not actively involved in global commerce, globalization can also affect site selection decisions, as globalization can spearhead change on business activities, consumer market and the balance in the competitive market (Rabianski, Delisle and Carn, 2001).
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E-Business is considered to be the third trend that has complicated the site selection process. This is a trend that has been fostered by rapid change in technology due to the growth in internet usage. This revolution has spearheaded the e-commerce revolution that focuses on business to consumer transactions. However, this form of business activity has expanded over the years dramatically having an effect on companies operations on how they would relate with their target market (Rabianski, Delisle and Carn, 2001).
As for small businesses, for the businesses to success, the owners must have good understanding of the happenings in the business world by translating into profitability and cash flow returns. They should create models that will help to quantify the variability in costs and potentials for the various sites they have considered. This process will allow the business owners to define factors that are significant to their business successes, find those locations that are vital to contributing to their success and compare how the limited variations will relate to their profits and cash returns (Gattis, 2010).
In conclusion, the importance of this topic cannot be overlooked since it is highly comprehensive and so many parameters have to be considered. The reasons on selection of a business location vary depending on the nature of business thus extensive research needs to be conducted on different forms of businesses.
Gattis, C. (2010). Retail site selection for small business. Blue Point Strategies. Available at
Kimelberg, M. S., and Williams, E. (2013). Evaluating the Importance of Business
Location Factors: The Influence of Facility Type. Growth and Change, 44, 92-117
Rabianski,S., Joseph, DeLisle, R., James and Carn, G. Neil (2001). Corporate real-estate site
selection: A community specific information framework. Jrer, 22, 1-34.