Business Location Factors and Growth Strategies

Factors for Choosing a Business Location

For an employer to carry out their activities, they need to choose the physical space in which to install the necessary factors for production. Key considerations for location include:

• Market demand: Examines whether there is interest in the product to be offered within the population or the area where the company wants to install.
• Supply of raw materials: Assesses the quality of incoming materials, cost, and ease of obtaining them.
• The labor market: Considers possible workers, their expertise, labor costs, and legal situation.
• Communications and transport: Takes into account if the location has readily accessible transport and communication links.
• Supplies: Availability of essential supplies, such as water, necessary for the operation of the company.
• Cost of construction and land: Keeps in mind that prices for plots and construction vary by location.
• Legislation: Knowledge of legal regulations, restrictions, and available financial aid.
• Investment and financing: Interest in locating the company where access to financial institutions is easy.
• Economic development: Values the general development of the chosen region.

Criteria for Measuring Company Dimension

The dimension of a company refers to its capacity for production. Common criteria for measuring company size include:

1. Number of workers: Micro-enterprises (up to 10 workers), Small (up to 50 workers), Medium (up to 250 workers), and Large (exceeding 250 workers).
2. Sales volume: Also known as turnover or income.
3. Production volume: Measured in either physical or monetary units.
4. Own resources: Capital contributed by partners and accumulated reserves.
5. Total resources: Includes all assets in operation, including foreign equity.
6. Annual net benefits: Profit after deducting taxes.

Business Growth Strategies

Internal Growth and Specialization

Internal growth involves intensifying efforts on existing products. Specialization strategies include:

• Market penetration
• Market development
• Product development

Diversification Strategies

Diversification represents a break with the company's trajectory by developing new products for new markets. This can be:

• Related diversification: When there is a connection or similarity between new and existing products.
• Unrelated diversification: When no relationship exists between new and old products.

External Growth and Cooperation

• Merger (A + B = C): Two companies combine to form a new entity.
• Absorption (A + B = A): One company acquires and integrates another.
• Participation: When Company A buys a controlling interest (e.g., 51%) of Company B's shares.
• Cooperation and partnership: Aims to reduce competition that would exist under normal circumstances.
• Franchising: A model for rapid expansion through third-party operators.