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Ict Consultant

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Choice of establishment factor
Description
The market
The market is an important factor because it affects turnover. This makes the business’ proximity to its customers important. For example, a vegetable shop has to be located near its customers as vegetables can deteriorate if they do not reach the consumer immediately. The relationship between the population composition, productivity and economic opportunities has to be analysed including current and potential competition.
Raw materials
It is important for raw materials to be readily available. However, raw materials do not have to be at the place of establishment as they can be transported, provided the means of transport is cheap, efficient and reliable. Raw materials are divided into two categories namely: natural raw materials (for example, platinum used in making car catalytic converters) and raw materials that occur naturally but are cultivated (for example, wood).
Labour availability
For a business to function effectively, one of the contributing factors is the quality of labour. There should be enough skilled and unskilled labour in the area in which the business is to be established. The labour costs of the area and laws should also be considered. For example, a car assembly business cannot be located in an area where the skilled labour that can operate the machinery is unavailable.
Capital
It is important for capital (money used in starting the business) to be acquired at favourable interest rates if it is to be borrowed. For example, interest rates may differ in urban and rural areas. Therefore, interest rates in the area the business will be established in should be considered so as to reduce expenditure if capital is being borrowed.
Infrastructure
Infrastructure is the services and facilities essential to production, but which contribute little to it. Infrastructure such as water and power supply, good transport network, parking space and security are things to consider. For example, a car assembly business needs to be located where power is readily available.
Source: Nieuwenhuizen and Rossouw (2008).

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