Why are coffee shops always on busy corners, and car factories always near motorways? Location isn't an afterthought — it can be the difference between a queue out the door and an empty shop.
Choosing where to base a business is just as important as choosing what to sell. A great idea in the wrong location can still fail through high costs or a lack of customers, while the right location can give an average idea a genuine head start. Edexcel wants you to understand three groups of factors that shape this decision: proximity, the nature of the business activity, and the impact of the internet.
Proximity simply means how close a business is to something that matters to it. Four factors matter most.
Being close to customers matters enormously for a business relying on passing footfall, such as a shop or café.
A business needs a location where enough suitably skilled workers live or can realistically commute to.
Manufacturers especially benefit from being close to the raw materials they need, cutting transport time and cost.
A business might avoid rivals to be the only option locally, or deliberately cluster near them to share the footfall a busy area attracts.
What a business actually does directly shapes what it needs from a location.
Need genuine footfall — passing customers who can see and enter the shop — making a visible, busy location a real priority.
Need large, affordable space and strong transport links to move goods efficiently, mattering far more than an attractive shopfront.
Often prioritise reliable internet access and proximity to skilled staff over passing footfall.
E-commerce — buying and selling goods or services online — has genuinely changed what location needs to achieve. A business trading entirely online doesn't need customers to physically visit at all, meaning it can trade from a cheap warehouse rather than paying premium high-street rent, while reaching customers well beyond its immediate local area.
It's a common mistake to assume this means location no longer matters at all for an online business. It still does — an online business still needs a base with good transport links to actually deliver its goods, and reliable internet and access to skilled staff to run the operation. What's changed is which location factors matter most, not whether location matters at all.
Many businesses now combine both approaches through a "clicks and bricks" strategy — a physical shop for customers who want to visit in person, alongside an online store reaching a much wider customer base.
Drag each scenario into the proximity factor it best illustrates.
Standalone questions below are typical of Section A — no case study needed. The 6 and 9-mark questions are built around a Source Booklet–style case study, matching how Section B and C actually work in the real exam.
Which one of the following best describes e-commerce?
A. Buying and selling goods or services using the internet
B. A type of business ownership
C. A method of borrowing money
D. A type of market research
Answer: A.
Outline one factor a business should consider when choosing its location.
Structure guide: two linked points — eg "A business should consider proximity to labour (1), ensuring enough suitably skilled workers are available nearby to be recruited (1)." Points must connect; unlinked points cap the mark at 1.
Explain one way in which e-commerce has changed business location decisions.
Structure guide: 1 mark identifying a way, plus 2 further marks developing it — eg "E-commerce allows a business to trade without customers visiting in person (1), meaning it can operate from a cheaper warehouse rather than expensive high-street premises (1), lowering costs that might otherwise be passed on through higher prices (1)."
Analyse the impact on Noor's bakery of choosing the high street location over the edge-of-town unit.
Structure guide: application (AO2) and analysis (AO3a) together — eg identify that the high street unit offers far higher footfall but at a significantly higher rent than the edge-of-town option (AO2), then analyse how this could increase passing trade and sales, but the higher fixed cost of rent means Noor will need to sell considerably more to cover her costs than she would at the cheaper location, increasing her financial risk if trade is slower than expected (AO3a).
Noor is considering two locations for her bakery: the busy high street unit, or the edge-of-town unit near her flour supplier. Justify which location Noor should choose.
Structure guide: apply knowledge to Noor's specific situation (AO2), analyse points on both sides (AO3a) — the high street offers footfall but at greater cost and risk, while the edge-of-town unit offers lower costs and proximity to her flour supplier but relies more heavily on her online delivery plans to reach customers — then reach a clear, justified choice (AO3b).