Proximity to the market, raw materials, labour, competition and cost — five factors that pull a business's location decision in different directions, with rarely a single right answer.
Where a business chooses to set up — a city-centre unit, a retail park, an industrial estate, a rural site near raw materials — affects almost everything else about how it operates. The right location can lower costs, speed up supply, and put a business in front of the right customers; the wrong one can quietly undermine a good idea before it's had a chance to work, sometimes in ways that don't show up until months into trading.
Location decisions are also expensive to reverse. Unlike a pricing decision or a marketing campaign, which can usually be adjusted within weeks, a business tied into a five-year commercial lease, or one that has built a factory next to a particular supplier, faces real cost and disruption if it later decides the location was wrong. This is part of why AQA expects the decision to be treated carefully, weighing several factors rather than picking the first available or cheapest site.
AQA expects you to know five factors that typically drive a location decision, and — just as importantly — to recognise that these factors often pull in opposite directions, forcing a business to prioritise some over others.
Tap each card to reveal what it means and why it matters.
A florist selling fresh flowers needs to be near enough to its customers to deliver quickly before the product perishes. A solicitor or dentist depends on customers being willing to travel to them in person, so a location within easy reach of the target area is essential. The less convenient a location is to reach, the more customers a business risks losing to a more accessible competitor.
A cement works locates near limestone quarries; a sawmill locates near forests. Transporting bulky, heavy, or low-value raw materials over long distances adds cost that eats directly into profit margins, so businesses using large volumes of such materials often have little choice but to locate near the source.
Certain locations develop a reputation, and a genuine concentration of workers, in a particular skill — a city with several universities and technology firms nearby will have a deeper pool of software developers to recruit from than a small rural town. Locating near this kind of cluster can reduce recruitment costs and time significantly.
Restaurants, cafés and clothes shops often cluster together in the same street or district precisely because customers already travel there expecting choice — each business benefits from the footfall the others attract, even while competing directly for the same customers.
Cost isn't just rent — it includes business rates (a property tax that varies by location and premises size), the going wage rate for staff in that area, and running costs like utilities. A business squeezed on profit margins may have to accept a less visible location simply to keep these costs manageable.
Very few locations score well on all five factors at once — a site with great footfall usually comes with high rent, and a cheap site out of town usually comes with fewer passing customers. Choosing a location means deciding which factors matter most for that specific business.
It's also worth noting that "cost" rarely means just one figure. A business comparing two sites needs to weigh rent, business rates, and staff wages together — a site with cheap rent in an area with a high cost of living may still require higher wages to attract staff, eroding much of the saving. A careful comparison adds up the total cost of a site over a year, not just the headline rent, before concluding it's genuinely the cheaper option.
The five factors matter to every business, but which one dominates the decision depends heavily on what the business actually does.
Prioritises proximity to raw materials, transport links (motorways, ports) and space for large premises. Customers rarely visit in person, so footfall barely matters — factories and warehouses are usually found on industrial estates or out-of-town sites where land is cheaper and more plentiful.
Prioritises proximity to the market above almost everything else — a shop with no passing customers has no business at all. High streets, shopping centres and retail parks are chosen specifically for the footfall they bring, even at a significant premium in rent.
Businesses like hairdressers, dentists and solicitors need customers to physically visit, so visibility and easy access (parking, public transport) matter almost as much as for retail — though a strong local reputation can sometimes let a service business succeed slightly off the beaten track.
With no need for customers to visit at all, an online retailer can prioritise cost and transport links instead — locating its warehouse somewhere cheap with good motorway access to keep delivery costs down, regardless of how far that is from any particular town centre.
Drag each business into the location factor that's likely to matter most to it.
State two factors that influence a business's choice of location.
Structure guide: two correctly named factors — 1 mark each, no explanation required.
State and explain two factors Femi should consider when choosing between Site A and Site B.
Structure guide: state a factor grounded in the case study (1 mark), explain it (1 mark) — repeated twice over.
Analyse how choosing Site B rather than Site A might affect Riverside Bakery's sales.
Structure guide: a single developed line of reasoning grounded in the case study (eg: Site B has much lower footfall than the city-centre Site A → fewer passing customers are likely to notice or visit the bakery → meaning Femi may need to spend more on marketing to attract visitors deliberately → potentially offsetting some of the £2,300 monthly rent saved).
Recommend whether Femi should choose Site A or Site B for Riverside Bakery. Justify your answer using the case study.
Structure guide: a "recommend" question needs a justified judgement — weigh the footfall and visibility of Site A against the lower costs and parking of Site B, specifically for a bakery and café, before reaching a clear final recommendation.