Why it’s always Location, Location, Location and Location!!!

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It’s always Location, Location, Location and Location because when you choose a location for your factory, office, house or nearly everything you have to take into account a lot of things to make sure that your money is well spent, first off you might what to ask, what is the “Perfect” location and what does “Perfect” mean when searching for a location for a factory.

A perfect location is one with the least amount of risk and where the cost of making your product is kept to a minimum. It is the a place which gives you the most advantage you can get A good and cheap workforce, perfect distance between distribution points and if need be, a good return when you sell that land.

Most large companies use what is called “Locational Analysis” to survey a chosen location to make sure it is to their advantage to buy that location

These are the 4 things they do when analyzing a location:

  1. Trade Area Analysis
  2. Traffic analysis
  3. Competitive Analysis
  4. Demographic Analysis

First off the line is the trade area analysis, what this does is basically assessing the area that your building will affect, it’s kind of hard to explain in words so I’ll do it with a picture

fig1[1]The Yellow square is your building, the green squares are the affected houses and residential areas and the red ones are the unaffected housing areas, what you would want is to find a place with the highest concentration of people while not infringing into another company’s territory so you would be able to monopolize that certain area and not have to split your market share in a certain area with a competitor.

The second would be the traffic analysis, this analyses the number of potential customers passing by the building during certain times of the day and also travel routes between the proposed building and potential customers so as to make sure that your building is easily accessed by potential customers and is in a concentrated traffic area to make your building more visible.

On to the third; The Competitive analysis, like what i said earlier you don’t want to be near competition cause you will eat into their share and they will eat into your share leading into lower profits for you and your competitor (Unless that’s what you’re aiming for). The competitive analysis weighs these variables: nature, location, size and threat of competition in a certain trade area and then judge if building your building there is really a good choice or not.

Time for the last one: the Demographics analysis. Now this one of the most important ones because it essentially means checking out the population within the trade area and finding out their age, sex, job, and other stuff about the general population in the trade area. Most shops do this to find out what to stock and what not to stock cause you wouldn’t want to stock 5000 menstruation pads in a community with a female concentration of only 30% nor do you want to build an office building in an area with no companies needing offices, that’s why the demographics analysis is probably the most important analysis heresocial-media-demographics9[1]

This picture will give you a sense of what demographics are all about although this picture is not about demographics in a trade area but about demographics in social media, but even so the concept is totally same.

And all that’s just the surface of location choosing but I’ve already put in most of the basics. I hope you enjoyed the read!

References:
http://biztaxlaw.about.com/od/glossaryd/a/demographics.htm
Gordon, Ian (1989). Beat the Competition: How to Use Competitive Intelligence to Develop Winning Business Strategies. Oxford, UK: Basil Blackwell Publishers
http://businesscasestudies.co.uk/business-theory/operations/business-location.html#axzz2Hspl9PBO

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