Firms Faced with Rivals and Advantage of Location Essay

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Firms Faced with Rivals and Advantage of Location

The location of firms depends on factors such as cost, quality of inputs and even their availability. These factors can vary from place to place so this gives firms an incentive to locate in the lowest cost locations with other things being equal. The location for most firms is highly dependent on labour costs and raw material costs as these are naturally less mobile place to place and almost completely immobile country to country, capital does not have as much effect on the location of a firm. Differences in labour costs are one determinant of location but on a regional scale in the UK there is not a substantial difference. The importance of raw
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An example of this is Silicon Valley in the US, where a large number of high technology firms chose to be located together in California. This occurred because the area had a high concentration of similar firms and related academic institutions, which provided a source of highly skilled manpower, which the industry needed to develop. The proximity of the market must also be considered. Firms have to make decisions about locations, and if raw materials can be transported cheaper than the final product, profit seeking behaviour will drive activities closer to the market. This obviously creates an advantage to the firm as firms can then offer more competitive prices, but eventually other firms will then follow and will have the same benefits as other firms in the area. Advantages of being nearer to the market will provide the firm with better market intelligence, less extended marketing channels and closer liaisons with buyers. This allows for more rapid and flexible response to changing market needs this can initially provide firms with a competitive advantage. Firms have perfect information about markets and eventually all firms end up at similar locations.

Locations can be

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