Every entrepreneur is faced with the problem of deciding the location for his/her factory or plant. Location of the business is the most important factor influencing its success or failure. It is a long-term decision which should take into consideration not only the present requirements of the organisation but also its future expansion plans.
• Errors in location may be very difficult and expensive to rectify. Location of a plant has a bearing on the layout of machinery and equipment as well as on the process of production.
The objective of a locational plan is to find out the optimum or best location for the particular plant. Such a location not only results in lowest cost per unit but also facilitates orderly growth of the firm. Hence, the most advantageous location is that at which the cost of gathering material and fabricating it plus the cost of distributing the finished product to the customers will be at a minimum. It is not necessarily the most favourable location but rather the site at which all the considerations are optimised.
• The location of the plant should also be able to meet the environmental guidelines and other regulations set by the Government specific to a particular industry.
There is no ideal location for all firms or even for one firm at all times. The choice of location depends on several important factors. It is influenced by the kind of products being manufactured, costs of production and distribution. The choice of an optimum location requires judicious balancing of all these factors.
• These restrictions may not be applicable to service enterprises which do not deploy any machinery.
Restrictions on locations are governed by a number of factors Some of the potential locations could be any of these based on the considerations and restrictions mentioned above:
• Your home
• A commercial area in your town or your neighbourhood