• Business location = where a business establishes and runs its operations. This could be one single site, several spread-out sites, or — for remote/online businesses — no fixed site at all.
• Six main factors drive the choice: proximity to market, proximity to labour, proximity to materials, proximity to competition, the nature of the business activity, and infrastructure.
• Businesses often stay put once established — loyalty to the community and the disruption of moving both act as anchors, and government incentives (grants, subsidies, tax breaks) can reinforce that.
• E-commerce has changed the game: online businesses need less prominent (and cheaper) premises, but they need reliable broadband, power, and good transport links for delivery instead.
• Law shapes location choice too — less developed countries often mean lower costs but weaker protections; more developed countries mean higher costs but better infrastructure and skilled labour.
• Trade blocs (like the EU, USMCA, ASEAN) group countries together to cut trade barriers — locating inside one can help a business dodge tariffs and quotas.

What "business location" actually means

Business location is simply where a business establishes and runs its operations. But that word "where" hides three very different set-ups, and IGCSE examiners love testing whether you can tell them apart:

• Single location: everything happens in one place — production, admin, sales, and logistics all under one roof. Think of a small independent bakery: the ovens, the till, the manager's desk, and the delivery van are all based at the same shop.
• Multiple locations: the business spreads its operations across several sites to exploit different advantages in each place — maybe a factory in a country with cheap labour, a design office in a country with skilled staff, and a warehouse near a big port. Big multinational manufacturers (like clothing or electronics brands) do this constantly.
• Remote / no fixed location: the business doesn't really "live" anywhere. It uses online tools (video calls, cloud software, messaging apps) to link staff and resources that are physically scattered. A freelance graphic design agency with staff working from home in five different cities is a good example.

The six factors affecting location

When choosing where to locate, businesses weigh up six key factors. It helps to remember these as the business essentially asking: "Where can I reach my customers, get my staff, get my supplies, watch my rivals, fit my operations, and move my goods — all as cheaply and effectively as possible?"

Why businesses often stay where they started

Here's something that surprises a lot of students: even when a "better" location exists on paper, many businesses stay exactly where they were first set up. Why? Two human, non-financial reasons:

• Loyalty to the community — the owners often feel a genuine attachment to the place that supported them while the business was growing, and don't want to abandon it.
• Upheaval and continuity risk — moving a business is disruptive. Staff may not want to relocate, customers may not follow, and operations could be interrupted during the move — all of which threatens business continuity.

On top of these emotional/practical reasons, governments sometimes add a financial nudge to keep businesses in a particular area through incentives — subsidies, grants, or tax benefits — especially in places that need economic support.

E-commerce and location decisions

E-commerce means buying and selling goods and services online. Crucially, some businesses run both a physical store and sell online (a "click and mortar" model), while others sell purely online. E-commerce has grown massively in recent decades — even small local businesses can now reach customers internationally without ever opening a second shop.

Because e-commerce fundamentally changes how a business reaches its customers, it also changes what matters when choosing a location. There are four big factors specifically for e-commerce businesses:

Lower business costs

Because online customers don't physically walk past the premises, a website store doesn't need a flashy, high-footfall location the way a physical shop does. This means e-commerce businesses can use smaller premises in lower-profile (and cheaper) areas — they simply don't rely on foot traffic to bring in sales the way a high-street retailer does.

Cost and availability of labour

E-commerce businesses with remote workers may only need a small central hub (for warehousing/dispatch, say), since most staff just need online access to do their jobs from home. However, they still typically need experienced call centre and sales staff to handle customer queries, so labour availability for these specific roles still matters.

Proximity to transport infrastructure

Here's the twist: even though e-commerce businesses don't need customers walking past their door, they absolutely still need to get physical products into customers' hands. That means location near highways, rail networks, or logistics/courier partners becomes a key consideration — delivery speed and reliability is often what makes or breaks an online retailer's reputation.

Reliable IT infrastructure and power

An e-commerce business (and its remote workforce) lives and dies by its internet connection. Remote workers need access to high-speed broadband at home, and the business itself needs to avoid areas prone to power outages, which could take its online services down entirely. This is a growing priority for governments too:

How law shapes location choice

Laws are rules created by a government to regulate the actions of citizens and businesses. Regulation is the process of actually enforcing those laws and making sure businesses comply. Governments use this power in two directions:

• Incentivising businesses to locate somewhere — e.g. offering grants or reduced tax rates in areas of high unemployment or industrial decline, to encourage job creation.
• Deterring businesses from locating somewhere — e.g. strict bylaws in areas of outstanding natural beauty that restrict what business activity is allowed, or tough environmental laws that put off a heavily-polluting manufacturer.

Less vs. more economically developed countries

This is one of the most exam-tested ideas in this chapter — the presence or absence of laws affects location choice in two opposite directions:

Types of law that affect location

Notice the pattern: employment law raises the cost of hiring and firing staff, environmental law raises the cost of production and waste management, and consumer law raises the cost of marketing and after-sales service. A business locating in a country with strict versions of all three should expect higher compliance costs — but potentially a more trustworthy, sustainable, and skilled operating environment in return.

The influence of trade blocs on location

A trading bloc is a group of countries that agree to reduce or eliminate trade barriers between themselves. There's a whole spectrum of how tightly countries integrate:

Globally, there were more than 420 regional trade agreements in effect in 2022 — trade blocs are everywhere. Major examples include:

• EU (European Union)
• USMCA (United States, Mexico, Canada — previously known as NAFTA)
• ASEAN (Association of Southeast Asian Nations)

Worked example — the free trade area: the USA, Canada, and Mexico have reduced or eliminated many trade restrictions between themselves. But look at how differently they each treat Cuba, a country outside their bloc:

• The USA refuses to trade with Cuba entirely — a complete embargo on all exports/imports.
• Canada does trade with Cuba, but imposes tariffs on all imports from Cuba.
• Mexico trades freely with Cuba, with no restrictions at all.

This shows the key feature of a free trade area: members agree to abolish trade restrictions between themselves, but each member keeps its own independent restrictions with countries outside the bloc.