Factors Influencing Plant Location

The factors which influence plant location can be classified into general factors and specific factors:

General factors: These are:

  • Availability of land for present and future needs and cost of land and land development and building etc.
  • Availability of inputs such as labor and raw material, etc.
  • Closeness to the market place
  • Stability of demand
  • Availability of communication facilities
  • Availability of necessary modes of transportation like road, rail, airport, and waterways.
  • Availability of infrastructural facilities such as power, water, financial institutions banks etc.
  • Disposal of waste and effluents and their impact on environment
  • Government support, grant, subsidy, tax structure
  • Availability of housing facilities and recreational facilities.
  • Demographic factors like population, trained man power, academic institutions, standard of living, income level, etc.
  • Security culture of the society
  • Fuel cost

Specific Factors: A multinational company, desiring to set up plant should consider the following aspects in addition to the normal factors:

  • Economic stability of the country and the concern of the country towards outside investments are to be considered
  • The success of operation of the factory depends upon the cultural factors, language and cultural differences which can present operating control and even policy problems. Units of measurement are also very important in international business.
  • Analysis must be based on the factors like wage rate, policy, duties, etc.,
  • The Company can set up joint ventures with any leading local giants that will solve many local problems

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