Sometimes firms have to decide where to build a new factory. It is important to consider the different costs of different locations.
Businessmen take into account the natural and acquired advantages of a particular area.
An area may have a water source for waste disposal or cooling. An area may be flat or isolated and attract dangerous or unpleasant industries. An area may have the right climate for the production of a good. Weight - losing industries use bulky raw materials to produce a compact finished product and tend to locate near the source of raw materials. An area may have developed a number of advantages as the result of firms locating in the region.