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Location options for retail and service businesses


A firm location of determines how it operates and what factors hinder or enabling the firm to operate effectively.Localization of industry is beneficial in many instances, and at the same time has its demerits.Concentration of businesses service in the same location gives firm economies of externalities.

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These externalities come in form of backward linkages to the services from other firms, pulling a training school for manpower development and workers training.


Advantages of Central Business District include:

I. Encourage the development of supportive service centers;

ІІ.  Access to high skilled labors;

ІІІ. Access to operational tools and spare parts;

ІV. Access to modern technology and information technology;

V. Encourage development of common training centers for staffers and clients orientation.

Disadvantages of locating a service firm in a business district include:

I.  Increase in  competition level among service firms;

II.  Increase in cost of operation due to congested industry and business district.

Advantages of Neighborhood location

І. Having opportunity to get feedback from customers and clients;

ІІ. Easy advertisement of services to clients;

ІІІ.  Personal services are easily tailored to client taste.

ІV. Assess to raw material for retail stores.

Disadvantages of Neighborhood location

І.  Service provision are restricted to those in the neighborhood;

ІІ. High cost for introducing new technology and workforce training.

Advantages of Shopping Centers and Malls location

І. One time shopping is easily carried out by customers;

ІІ. Attraction of different categories of customers are encourages  due to product and services differentiation

Disadvantages of Shopping Centers and Malls location:

І.  Shop lifting are easily carried out due to many differentiated products;

ІІ. Customers may be tempted to buy the wrong product due to plethora of appealing products in the  window dressing;

Advantages of store near competitors:

І.   New strategy and business idea are learn from rivals;

ІІ.   Cost reduction are reduced due to the competition among firms;

ІІІ.  Raw materials are easily accessed;

ІV.  Innovation are encouraged due to healthy competition among firms

V.   Encourage introduction of modern technology

Disadvantages of store near competitors:

І   Organization strategies are counterpart thereby rendering the operations ineffective;

ІІ   Unhealthy competition leads to blackmailing and sabotaging activities against rivals

Advantages of outlying areas

І     Proper structure and market planning is encouraged;

ІІ     Easy transportation of goods are enabled

ІІІ     Easy location of service and goods to an outlet

Disadvantages of outlying areas

І    Few operators are encouraged in the market which results in price hike;

ІІ   Customers cannot make all service shopping in one location.

Advantages of Home based location:

І    Backward linkage to local raw materials is encouraged;

ІІ    Cheap labor and cost reduction is easily accessed;

ІІІ   Local taste and culture is easily recognized and upheld

 Disadvantages of Home based location

І    Varieties of product and service are restricted due to local taste and wants;

ІІ     Difficulty in introducing new technologies


The location of retail or service businesses influences how well such firm operates. The location may   result in the advancement of the business operations or may hinder it depending on the location and business type. It is then germane that adequate assessment is conducted to weigh the pros and cons of a place where a business would be located in order to derive maximum advantages.

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Location options for retail and service businesses. (2017, Feb 07). Retrieved April 6, 2020, from