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Size and Location of a Business

 

SIZE AND LOCATION OF A BUSINESS

There are different forms of businesses, which are also of different sizes. Large businesses tend to be located in major towns and capital cities while small businesses are located all over the country. Mumias Sugar Company is the leading sugar manufacturer with 60% market share.

A firm

A firm is an individual business enterprise under one management established to carry out specific production activities for example Bata Shoe Company, Mumias Sugar Company, and New KCC Limited among others.

An industry

An industry refers to a group of firms that produce similar products and compete for the same market. For example firms in the sugar industry include Mumias, Sony, Chemelil and Muhoroni sugar companies.

Access to power supply -power supply is essential to operations of a firm especially where the firm employs heavy machinery and equipment.

 

Access to water - water is necessary in the production process.

Government policies -government may sometimes pass policies that influence the location of firms in an attempt to encourage balanced development in a country, for example, constituency development projects and the rural electrification programme.

Access to social facilities-social facilities such as hospitals, schools and sporting facilities provide incentives to the workers.

Access to markets - most firms are usually located near the market for their products to cut down on the distribution costs and if the final product are highly perishable.

Attraction of subsidiary industries as they support trading and production.

Creates a pool of skilled labour; concentration of firms bring various levels of labour together.

Development of social amenities; schools, recreational facilities and health centers will be developed since there is high demand for them.

Establishment of better infrastructure; this is either by the government or private sector.

Disadvantages of localization

Imbalanced regional development;concentration of facilities in one area will make other areas to become disadvantaged.

Rural-urban migration ; availability of employment opportunities in urban centres lead to mass movement of people from rural areas to urban centres.

High rate of unemployment; concentration of many potential employees in an area against few job opportunities lead to unemployment.

Social problems; concentration of people lead to congestion, high rate of immorality,the spread of HIV/AIDS and shortage of housing hence emergencies of shanties.

Insecurity;high concentration of people in an area leads to high rates of crimes and insecurity.

Environmental pollution

Concentration of firms in one place leads to environmental degradation.

Many firms have relocated to Athi River region due to improved infrastrucure.

Production economies; derived from use of better machines, equipment and improved technology of production.

Management economies; they result from good management practices as well as employment of competent and qualified management staff.

Financial economies; emanates from availability of financial resources which are used to buy the required assets.

Labour economies; they result from availability of specialized and competent employees which ensures increased output.

External economies of scale

These are benefits that that are enjoyed by a firm due its nearness to other firms. These benefits may be available to all firms in the locality.They may include:

  • Easy access to labour from institutions nearby.
  • Development of social amenities; firms operating in the same area may combine forces to develop social facilities such as schools, hospitals and recreational facilities for the benefit of all the workers.

Social facilities such as hospitals benefit all the workers in the locality.

  • Development of infrastructure; many large firms located in an area leads to development of general infrastructure such as roads, power, drainage systems and communication among others.

Access to auxiliary services; such as banks, post offices, insurance companies, repair and maintenance firms among others.

Internal diseconomies of scale
These are shortcomings or disadvantages suffered by a firm due to its operations in large scale.They include:

  • Marketing diseconomies; as output increases beyond a certain level the market for the produce diminishes.
  • Managerial diseconomies ;as a firm expands its management becomes complex.
  • Financial diseconomies ; these are losses which a firm may suffer due to inability to acquire adequate finances for its expansion.
  • Technical diseconomies ; these are shortcomings that may arise due to the firm's inability to operate at its maximum capacity.

The stalled building project shows internal diseconomies of scale.

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Waste management problem leads to environmental pollution

Existence of small firms in an economy

There are reasons why small scale firms continue to exist hand in hand with large scale firms in an economy even where there is direct competition and these include:

Personal services such as hairdressing are efficiently provided by small firms.

Implications of production activities on the environment and community health

Production activities normally have adverse effects on the environment and on the health of the community around. Some of these effects are as follows:

Air pollution : this is whereby poisonous gases are emitted into the atmosphere from factories, machines or vehicles. These gases may have the following effects:

Acid rain which is caused by emission of sulphur dioxide into the atmosphere which might destroy forests, crops and roofs of houses.

Depletion of ozone layer is caused by chlorofluorocarbons which break down the earth's ozone layer which acts as a filter of ultra-violet sun rays.

Global warming is caused by release of carbon dioxide and other gases like methane which results to gradual warming of the earth which may raise sea levels causing floods.

Breathing problems: some gases emitted to the atmosphere may cause health problems when inhaled by human beings and animals.

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Water pollution: as industries use water in their production processes, some of them may dispose their waste into the river, for example, river Nzoia, Nairobi river among others.

Noise pollution : noise produced by aeroplanes, vehicles and industrial machines may reach levels harmful to human beings and may cause hearing problems.

Solid waste pollution: some businesses do not dispose their garbage in proper way which may create a terrible sight which eventually becomes a breeding ground for flies especially when it rains and leads to outbreak of diseases like cholera.

Click on the play button to view cutting down of a tree in Mau forest.

Open depression left after mining

The following video shows tree planting as a measure of maintaining healthy environment.

 




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