Location, Location, Location! Revision Notes | GCSE AQA Business

1. Why Location Can Make or Break a Business

Imagine two coffee shops: one tucked down a quiet back street, the other on the corner of a busy train station. Same product, same price, same quality — but one thrives and one struggles. The difference? Location.

For a business, choosing where to operate is one of the most consequential decisions its owners will ever make. Get it right and costs fall, customers flow in, and the business grows. Get it wrong and even the best product in the world cannot save it.

This lesson unpacks the factors that businesses weigh up when choosing a location — and shows you how to write about them in a way that earns marks in the exam.

2. Key Concepts: The Language of Location

3. The Factors That Drive Location Decisions

No two businesses weigh location factors in the same way. A steel manufacturer and a hairdresser both need a location — but the factors that matter most to each are completely different. The key is understanding which factors matter most for which type of business.

There are six main factors to know for AQA GCSE. Each one can either reduce costs or increase revenue — and the best exam answers always link the factor back to one of those two outcomes.

• Proximity to the market (customers)
• Proximity to raw materials or suppliers
• Availability and cost of labour
• Infrastructure and transport links
• Government incentives and planning permission
• Costs of the site (rent, rates, purchase price)

Now let's look at each factor properly — not as a list to memorise, but as a set of business decisions that actually make sense when you think them through.

3a. Proximity to Raw Materials

Historically, heavy industries like steel, coal, and textiles located near their raw materials because transporting bulky or heavy inputs was expensive. The closer the factory to the coal mine or iron ore deposit, the lower the transport costs.

This factor is less dominant today for most businesses, but it still matters for industries where raw materials are heavy, perishable, or expensive to move. A fish processing plant, for example, will locate near a port — not in the middle of a city — because fresh fish cannot travel far before it deteriorates.

3b. Labour: Availability, Skills, and Cost

Every business needs workers. But the type of workers it needs — and how much it can afford to pay them — shapes where it locates. A business that needs large numbers of low-skilled workers will look for areas with high unemployment and lower wage expectations, because this keeps labour costs down.

On the other hand, a business that needs highly skilled specialists — software engineers, surgeons, financial analysts — will locate near universities or in cities where that talent already exists. Paying a premium for the right skills is worth it if those skills drive the product.

This is why you see technology companies clustering around cities like London, Manchester, and Cambridge. The talent pool is there, and businesses compete to access it. Location and labour are inseparable for knowledge-based industries.

3c. Infrastructure and Transport Links

Infrastructure refers to the physical systems that support a business: roads, railways, airports, broadband, and utilities like electricity and water. A business that relies on moving goods quickly — a logistics company, a manufacturer, a large retailer — needs excellent transport links to keep costs low and deliveries on time.

Think about why so many large distribution centres are built near motorway junctions. It is not a coincidence. Lorries can load up and reach any part of the country within hours. Poor road access would add time and fuel costs to every single delivery — and those costs compound fast at scale.

For service businesses, digital infrastructure matters just as much. A financial services firm needs fast, reliable broadband. A business that cannot connect reliably to clients or cloud systems is at a serious competitive disadvantage, regardless of how good its product is.

3d. Proximity to Market

For businesses that sell directly to consumers — retailers, restaurants, hairdressers, estate agents — being close to customers is often the single most important factor. Footfall drives revenue. A shop that nobody walks past will not survive, no matter how good its products are.

But proximity to market is not only about retail. A business-to-business (B2B) supplier that delivers components to car factories will locate near those factories to reduce delivery times and transport costs. The 'market' here is other businesses, not consumers — but the logic is identical.

3e. Site Costs and Government Incentives

The cost of renting or buying a site varies enormously by location. A retail unit on Oxford Street in London costs vastly more than an equivalent space in a small market town. For a business with tight margins, site costs can be the deciding factor — particularly for start-ups with limited capital.

Governments sometimes intervene to encourage businesses to locate in specific areas. Enterprise zones, for example, offer reduced business rates, simplified planning rules, or grants to attract investment into areas with high unemployment or economic decline. A business that qualifies for these incentives can significantly reduce its fixed costs.

This is worth remembering for evaluation questions. Government incentives can tip the balance when a business is choosing between two otherwise similar locations. The financial benefit of lower rates or a grant can outweigh other disadvantages of a less-than-ideal site.

4. Applying Location Factors: A Worked Example

Theory is straightforward, but exam questions ask you to apply these factors to specific businesses. Let's walk through how to do that systematically.

Consider two very different businesses: a frozen food manufacturer and a private dental practice. Both need a location—but the factors they prioritise are almost completely different. Here’s how to think through each scenario using a step-by-step method:\n1. **Identify the Business Type**: Determine whether it is a goods manufacturing or a service business.\n2. **List the Key Location Factors**: For each type of business, identify the factors that influence location decisions. \n3. **Analyse Each Factor's Impact**: Assess how each factor affects costs and revenues of the business.\n4. **Make a Comparison**: Draw comparisons between the two businesses to illustrate how location factors differ based on business type.

Notice how the same set of factors produces completely different location decisions for these two businesses. This is exactly the kind of comparison an examiner wants to see in a 'compare' or 'evaluate' question.

5. The Impact of Technology on Location

One development that has genuinely changed the rules of location is the internet. E-commerce businesses do not need a high-street presence at all — their 'location' is a website, and their physical site is a warehouse that can be anywhere with good transport links and affordable land.

Remote working has had a similar effect on office-based businesses. If employees can work from home, a business no longer needs expensive city-centre office space. It can locate its headquarters wherever costs are lowest, or operate with no fixed office at all.

This does not mean location no longer matters — it means the factors that matter have shifted. For an e-commerce business, infrastructure (broadband, motorway access for deliveries) and site costs (affordable warehouse space) become the dominant factors, while proximity to market becomes far less important.

6. Exam Preparation: Writing Answers That Earn Marks

Location questions appear regularly in AQA Business exams, and they reward students who can do more than list factors. The examiner wants to see you apply factors to a specific business context and evaluate which factors matter most — and why.

For 'explain' questions, always use the structure: Factor → Effect on the business → Outcome. For example: 'Locating near a motorway junction reduces transport costs [factor], which means the business can distribute goods more quickly and cheaply [effect], improving its profit margins [outcome].'

For 'evaluate' questions, you need to weigh up factors against each other and reach a justified conclusion. Do not just list every factor — pick the most important one for the specific business in the question and explain why it outweighs the others. Examiners reward judgement, not length.