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Factors may be placed into three basic categories: 1. Natural Advantages 2. Acquired Advantages 3.

Government Advantages The factors can be listed as follows: a) Cost-[Acquired] b) Closeness to a source of raw materials-[Natural] c) Closeness to a source of power-[Acquired and/or Natural] d) Closeness to a market-[Acquired] e) Closeness to an educated working force-[Acquired] f) Closeness to a method of transport-[Acquired] g) Government Intervention-[Government] h) In a suitable climate-[Natural] i) In a stable political atmosphere-[Government] j) Health facilities-[Acquired]

Sunday, February 17, 2008


Factors affecting selection of plant location:
4.] Factors affecting selection of plant location:* 1. Availability of R.M (Transportation cost of R.M & Market is min; Location Decision) Depends on the type of Raw Material: 1.) Loses weight:- Near to the place of R.M. (Cement, Iron & Steel, Sugar factories) 2.) Weight of the product increases:- Near to the market (Tyre, Soap) 3.) Perishable product:- Near to the Market (Milk)

4.) Price of Finished product very higher than R.M.:-Near to the Market 5.) R.M. are precious but of lighter weight:- Near to the Market (Diamond Industry)
Product Index= Weight/ Size of Raw Materials (>1 Near to the R.M, <1>

Weight/ Size of finished goods 2. Proximity to the market (Demand for the product, Tran cost min; Bulky, Perishable, Fragile) 3. Transport facilities (Transporting R.M, Finished products, Employees & their children) Mode of transport depends upon the Size of R.M, Distance between Factory & Places of Markets & R.M. (Coal: Railway wagons, Sugar cane: Road transport) 4. Motive power (Coal, Electricity, Gas; Regular & sufficient supply, Transport Cost, Permission of GEB) 5. Man power (Skilled, Semiskilled, Unskilled, Supervisory staff, Managers; Attract man power by offering attractive wages or Pay packets increases total cost of production, Location where manpower is easily available 6. Financial facilities (For Collection & Payment of Cheques, For raising Short & Long term capital) 7. Communication facility (Maintain Contacts & Relations with Customers, Suppliers, Creditors, Bankers, Gov officers, Shareholders, Deb holders 7; Post Office, Telephone, Telegram, Fax, Internet 5;Difficult to get Quick information of Prices & Supply position) 8. Climatic factors (Affects Production Quality, Cost & Efficiency of workers; Artificial climate is costly; Pleasant for living & Favourable to the Industry) 9. Historical & Personal factors (Native place or Birth place of Promoter or his Father or Desire of Wife) 10. State aid (Developing Eco backward areas Gov provides Subsidies, Tax Concession, Institutional loans, Cheap land, Transport facility, Guaranteed market6; Adv of such Concessions Location in eba)

11. Other factors (Where other units of the industry have been locate; Centralisation of many units Auxiliary services develop there Training centres, Maintenance units, Petrol Pump 12. Decentralisation (Avoiding Social Evils, Risk or War; Gov encouraging it)