Quantity, quality and cost of land - The total cost of the land is compared with its earning potential for the business; the cheapest location may not be ideal if it is in an unsuitable location that will cause more implications than benefits.
Availability and quality of labour - The workforce of an area must be suited to the workforce required by the business. Factors such as the reputation of local education, socioeconomic demographics, regional unemployment rates and protective legislation for workers will be taken into consideration.
Proximity to market - Bulk-increasing businesses, where the final product costs more to transport than its components, will prefer to locate nearer to their target market in order to reduce transport costs.
Access to raw materials - Bulk-reducing businesses, where the costs of transporting components is greater than the final product, will prefer to locate nearer to the source of the components.
Government incentives and limitations - Financial incentives, such as grants, subsidies or tax benefits, are often offered by governments to attract businesses to locate in a certain area. On the other hand, cost-inducing legislation or trade protectionist measures, may deter businesses from a certain region.
Feasibility of e-commerce - Businesses who can utilise e-commerce to access its target market can locate in cheaper locations.
Infrastructure available - The transportation, communication and support networks required for efficient operations, such as the availability of public transport for employees, access to roads, rail, sea and air transportation methods, and availability of basic utilities such as clean running water.
Political stability - A stable political climate will ease tension in uncertainties over the introduction of legislation in the future that will implicate the business and its operations.
Clustering - Firms may prefer to locate near other businesses who operate in similar or complementary markets, to gain accessibility to its target market.
Offshoring - Involves relocating business activities and operations abroad, either through relocating offices or outsourcing to external organisations. Offshoring allows businesses to maneuver protectionist measures of certain governments, such as environmental and labour protection laws, or higher taxes and trade restrictions of a certain country.
Insourcing - The use of an organisation’s own people and resources to accomplish a certain function or task which would otherwise have been outsourced. Insourcing tends to be adopted for core business operations and functions, whose quality needs to be carefully observed, or outsourced activities that no longer have any cost-saving benefits.
Outsourcing - The practice of transferring internal business activities to an external firm as a method of reducing costs. Globalisation has intensified competition in many industries. To compete internationally, firms need to gain advantages by reducing costs. A strategic way businesses can gain a cost advantage is by outsourcing non-essential operations.
High Quality - Outsourced organisations hire specialists to complete tasks with a high quality standard. Businesses are also able to choose from a variety of subcontractors, this competition will drive outsourced subcontractors to offer competitive rates and higher quality service.
Labour Costs - Reduces labour costs as outsourced workers are not employed by the organisation. This means the business does not have to cover insurance, sick leave, pension, or bonuses for surpassing expectations
Efficiency - Businesses typically outsource non-essential operations, allowing businesses to focus resources on core activities.
Quality Management - Businesses do not oversee operations of subcontractors. If the subcontractors are revealed to have conducted unethical practices, that would implicate the businesses involved. The quality of the work produced by the subcontractors is ultimately unknown until the business receives the finished product from them. If the subcontractor fails to meet quality standards set by the business, or fails to meet the deadline, an organisation’s entire operations could be delayed.
Redundancies - Outsourcing will initially cause redundancies in the organisation. The reduction in job security will negatively impact staff morale and hence productive efficiency.