Location importance for business success essay
One of the more common expression is real estate is location, location, location. There are some who state that location is one of the most important decisions that a company can make because of the amount of time that they will be in that space. Mortgages are expensive and leasing contracts can be for many years. There are many factors that companies need to consider in choosing the right location including where to go to get the right customers, how the neighborhood is going to grow and who might come in to compete (Park & Khan, 2006). This can lead to a need for researching locations which could be expensive. Additionally, it might not be easy for a company to afford to spend money on the perfect location. This leads to the question of whether location is the most important aspect for business. In reality, although there is some room for debate, location is the most important consideration that a business to increase their profits because the right location can attract customers, improve labor and recruiting and affects the brand image for the company, all of which increase profits and growth for the company and are vital for survival in the current competitive business environment.
Location and demand
Location can increase sales because it affects the number and type of people that pass by or access the business. Busses should therefore take care to ensure that the area they choose is easily accessibly to customers that want to shop there. Stores should be placed in places where there are a lot of people who are walking around such as near hospitals, public establishments and close to residential homes. They must also have enough space to provide parking for their customers so larger stores must take this into account (Dan-Cristian & Raluca, 2014). The location can make a large difference with regards to profitably because it can affect the density of the customers that the business will receive. Business people should consider that when they put in their businesses they have to compete with others. Therefore making a decision to set up in a location with high competition versus low competition could mean the difference between a large profit and a small profit (Berg, 2014). The company must balance setting up in a location where there are a lot of other stores to attract people to the area, but also try to make sure that the area is not totally saturated and the competition will be too hard to survive. While population density considerations are important, companies also have to consider that location impacts the type of customers that are in the area because there is a risk of putting the business in area with the wrong type of customer. When choosing the business location, the company should take into account if population meets the characteristics of the demographic that the company is aiming for in terms of income, family size etc. so that they get the kind of purchasing power that they need to succeed (Mazze, 1972).
Location inputs and labor
Location affects the cost and availability of the firm’s inputs including the kind of labor that is available, the wage rate that the company has to pay to its employees Firms profit margins are partially determined by the cost and availability of its inputs and so it must choose its location to reduce its input costs as much as possible. Every location has different resources which can potentially contribute to competitive advantage. By choosing its location well, a firm can take advantage of each of these different resources in the best possible way (Chen & Hsiao, 2013). One of the main input considerations for companies are the labor that they need to run the operations and interact with customers. The availability of workers varies depending on location and therefore businesses have to take care that they choose to settle in a place with the right kind of labor. For industries like information technology, there is a great need for workers that are highly skilled. Often highly skilled people have attended college or university. Therefore it makes more sense for businesses to select places that have a higher than average concentration of college graduates (Hackler, 2003). In addition to the availability of labor, businesses must also consider how location affects the cost of labor. Companies have to make decisions on where to locate based on the amount of money that they have to pay their workers. There is a major potential savings available for US and European companies if they outsource their operations to lower cost regions in the Caribbean, India and the Philippines (Graf & Mudambi, 2005).
Location and brand image
In today’s competitive environment, companies have to have a strong brand image and location is part of the company image which increases loyalty. A company’s brand image is important so that customers know where the company is and so they come looking for it. Location is one of the ways that customers come to know about the business and recognize the brand. If a company does not choose the right location, it would cost them more to try to improve the visibility of the brand (Hayes, 2003). Additionally, the location impacts the way customers feel about the company such as whether or not it is upscale or low scale. Customers might not be convinced that a company is worth extra money or is really a luxury rand if it is located in a very bad part of town. This could be a problem for companies who want to target more expensive customers for its brand. Therefore, for strategy purposes, a company might want to project a certain brand identity. according to Bearden (1977 as cited in (Houston & Nevin, 1981)), location is on the seven attributes of a stores location that will impact the customers perspective of brand image. Location also impact the feelings of satisfaction and therefore loyalty towards the store. Customers who are not loyal to the brand or store will shop at many different location. If there is a sale they will readily go to a competitor. However if someone is loyal to a brand or store they will always put this store first (Bloemer & Ruyter, 1998). Therefore stores should consider that location will impact these customer perceptions and in turn how often they come to the store and spend money.
In conclusion, location is one of the most important decision companies can make that impact the success of their business. It is relatively expensive to set up and business location and it’s difficult to change. Therefore the company will need to deal with the consequences of their decision for a significant period of time. The location of the business affects the number and quality of customers that are able to easily access the store which in turns affects how much money the company receives. The company’s inputs such as labor are affected because some areas have more educated workers or they have lower wage rates. Finally, the location affects the way customers see the store, with respect to brand image. A more positive brand image can improve customer loyalty and increase the customer’s preference for shopping at the store.
Berg, N. (2014). Success from satisficing and imitation: Entrepreneurs’ location choice and implications of heuristics for local economic development. Journal of Business Research, 67(8), 1700–1709.
Bloemer, J., & Ruyter, K. d. (1998). On the relationship between store image, store satisfaction and store loyalty. European Journal of Marketing, 32(6), 499-513.
Chen, C.-J., & Hsiao, Y.-C. (2013). The endogenous role of location choice in product innovations. Journal of World Business, 48(3), 360–372.
Dan-Cristian, D., & Raluca, B. (2014). Empirical Research On The Impact Of Location And Service On The Retail Brand Image. The Annals of the University of Oradea. Economic Sciences, 1, 813-819.
Graf, M., & Mudambi, S. M. (2005). The outsourcing of IT-enabled business processes: A conceptual model of the location decision. Journal of International Management, 11(2), 253–268.
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Park, K., & Khan, M. A. (2006). An Exploratory Study to Identify the Site Selection Factors for U.S. Franchise Restaurants,. Journal of Foodservice Business Research,, 8(1), 97-114.
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