Relocation: Push and Pull factors.
The factors underpinning the decision process for a business set-up will be quite different to those factors which encourage an established firm to relocate to another area.
Relocation involves 'push factors' and 'pull factors'. Push factors are things that make a firm want to move from an existing location; these are normally negatives about that site. Pull factors attract a company to a new location and are positive reasons why the new location is preferable to the existing location.
Although the underlying factors on location remain the same, the forces on an industry or firm to move its production from where it is currently located to a new area may need to be stronger than those encouraging a new set-up to locate in an area. This is because of the concept of industrial inertia, which describes a situation where an industry remains in its original location even though the initial advantages of that location are no longer relevant and/or have disappeared. Inertia is the resistance of an object to a change in its motion. That is why you need seat belts (if the car suddenly stops, your body still wants to continue forward and that is inertia). Inertia applies to individual businesses as well as whole industries, when it comes to relocation.
When a firm or industry has been in a particular area for a long period, there are many pressures on that that firm or industry to remain there. Industries will build up local advantages over time as external economies, such as the availability of skilled labour, specialist local infrastructure and support activities may be lost if the firm relocates to another region. Industrial inertia also arises from the relative immobility of fixed capital in the form of plant and machinery. Simple, but potent personal factors, may block a move, including the unwillingness of existing staff to relocate because of friends, schooling etc. and because management wishes to avoid the stresses of the moving process.
Some of the questions facing a firm considering relocating include:
- How many of the key staff will relocate?
- Are suitably qualified staff available in the new location to replace those employees who decide not to move to the new area?
- How many redundancies will there be?
- Is there likely to be a problem with the unions?
- Will the move affect the firm's image and sales?
Managers may employ business tools such as Force Field Analysis and decision trees to consider whether a strategic relocation should would be beneficial to the firm.