While setting up your business, one of the most important decision is determining which place will be the most optimal choice for your target audience. A plant location refers to the choice of the region where men, materials, money, machinery and equipment are brought together for setting up a business or factory. There are multiple factors which in deciding which area should you select to carry out your business. Let’s understand them in more detail.
1) Sourcing of Raw Materials
In businesses that involve heavy manufacturing and are involved in sourcing raw materials which may be perishable in nature, it is always wise to choose locations that are easily accessible from the place of procuring your raw materials. The transport cost, as well as the risk involved in moving the product from one place to another, would get expensive should the location be far.
2) Availability of Labour
Another important aspect that goes into setting up your business is the availability of labour in the area you decide to set the location up. The cost that is generally advocated in the area and whether it fits your price bracket, as well as the availability of labour as per the skill set that your business may need is also a crucial factor.
3) Transportation Facility
If your transport cost is high, your cost of production will also tend to go on a higher side. One must understand that in order to establish a competitive advantage, ensuring that the cost of production is low is a must since it gives you an edge while also letting you allocating costs in marketing, selling and distribution activities in a much more optimal manner.
The kind of infrastructure that is needed to set up shop for your business must be taken into account while deciding on a location for your business. If there is heavy equipment and your business is vertically integrated, you may want to consider locating yourself in areas that give you enough space whereas if you are a services-oriented business which operate at a low touch frequency model, then you may not require as much space.
It is always a wise decision to evaluate the competition in the area in which you are considering establishing your business. Direct as well as indirect competition can lead to cannibalization which will not allow your business to prolifer and can ultimately lead to fallacies. In such circumstances, one must focus on enhancing their USP and establishing firm points of difference in order to establish a clear positioning of your product as opposed to your competitors.
6) Governmental Policies and Political Climate
A business must understand how local, regional, and state government regulations impact the workings of a business. Critical issues such as building plan approvals, environmental permits, utility connection approvals, and waste disposal permits can have a significant financial impact on your business.
These are the factors that contribute to a larger extent in determining the location of your business. A thorough analysis before making any decision is a must. One must also consider all make vs buy decisions while setting up their business for any location that they decide to go ahead with.