All firms, whether they produce goods or services, have to decide where to locate. This often come down to a choice between being close to their customers, or producing where it is cheapest - but there are lots of other possible considerations too. For example:
- Location of raw materials - the nearer you are, the lower the cost of transporting the raw materials.
- Location of the market - for services, if you locate where people can easily go, you will get more customers.
- Labour supply - Firms who need skilled labour need to locate where they can find these people. And firms who want to keep wages low may have to locate in areas of high unemployment.
- Government policy - Governments often pay big multinationals to locate in their country.
- Personal reasons - Owners and managers are human - they want somewhere nice to live.
- Climate - it’s obvious but important - especially in agriculture.
