Location

Background

In economics and business, “location” refers to the geographical placement of a company’s establishment or the positioning of its product within a market. The importance and advantages of a given location vary according to the type of business venture and the specific industry.

Historical Context

Although the concept of location has always been relevant, its importance surged during periods of industrialization and urbanization. Historic trade routes, colonial expansions, and industrial hubs were all formed based on strategic geographical positioning and the influence of aggregate economic growth through efficient distribution and resource availability.

Definitions and Concepts

Geographical Location: This encompasses the physical setting of a firm’s offices, production units, and stores. Effective geographical positioning maximizes accessibility to resources, is cost-effective, and may influence foot traffic and customer demographics.
Marketing Position: In a marketing context, location implies how and where a product is positioned in the marketplace. This involves brand image, relative quality perception, and pricing strategies.

Major Analytical Frameworks

Classical Economics

Classical Economics primarily concerns itself with factors such as labor availability and transportation costs. Locations that minimize cost while maximizing labor output are considered ideal in this framework.

Neoclassical Economics

In Neoclassical Economics, the focus is on equilibrium and optimization, whereby companies are analyzing optimal locations based on cost curves and maximization of utility and profit.

Keynesian Economics

Keynesians might explore how government intervention can influence location decisions through regional subsidies or infrastructure investments to stimulate economic activity and employment in specific areas.

Marxian Economics

In Marxian contexts, location decisions might be examined in light of class struggles, resource allocation, and the implications of capital mobility. Location reflects aggregated capitalistic endeavors, which may cluster around the retention of industrial power and labor contingencies.

Institutional Economics

Institutional Economics could study the role of regulatory and social frameworks that influence location, from zoning laws to cultural traditions that dictate acceptable placements and business practices.

Behavioral Economics

Behavioral Economics investigates how irrationality and psychological factors affect location decisions, past and present. Proximity to similar businesses such as banks clustering in financial districts might derive from a mix of psychological comfort and observed success rather than purely economic rationality.

Post-Keynesian Economics

Post-Keynesian thought often incorporates factors like historical legacy and institutional structure, scrutinizing how previously advantageous locations can remain beneficial or become obsolete despite changing economic landscapes.

Austrian Economics

For Austrian Economists, subjective preferences and entrepreneurial insights play a pivotal role. Austrians stress the importance of individual decisions and knowledge in deciding locations, driven by perceived opportunities and market gaps.

Development Economics

In terms of Development Economics, location analysis often pertains to regional development, resource allocation, access to education, and welfare. Geographic location highly influences the economic development potential of an area.

Monetarism

Monetarists might explore how fiscal and monetary policies affect business locations indirectly through interest rates, taxation, and inflation, shaping broader economic conditions favoring certain geographic areas over others.

Comparative Analysis

A comparative study of different businesses across locations can uncover patterns in profitability, sustainability, and strategic positioning, grounded in geographical benefits or shortcomings.

Case Studies

Examples such as the agglomeration of tech firms in Silicon Valley, the financial district in Wall Street or the City of London, and well-established ports-of-call in globally influential cities like Singapore highlight how elements of location affect industrial prosperity.

Suggested Books for Further Studies

“Geography of Transport Systems” by Jean-Paul Rodrigue
“The Economy of Cities” by Jane Jacobs
“The Location of Economic Activity” by Malcolm T. McNair
“Thünen’s Isolated State” by Johann Heinrich von Thünen

Agglomeration: A phenomenon where firms from related industries gather in proximity for mutual advantage.
Spatial Economics: Study of economic phenomena in geographical space.
Urban Economics: Focuses on spatial organization within urban environments and the economic implications therein.