9.1 - Costs, Technology and Infrastructure

Business start-ups always need to consider the cost, technology and infrastructure of a location when they are deciding where to set up their new venture. Costs are inevitable in business and they key is to keep them low.

Technology is vital and enables the business to keep up the pace in its competitive marketplace. Infrastructures create strong incentives for a business to have its base in a particular location.

Cost, technology and infrastructure can be either push or pull factors. A push factor will motivate the business to be more aggressive and competitive to reduce costs. Pull factors are incentives that attract the business to certain areas.

Push cost factors include high overhead expenses such as office rent and congestion charges. Pull cost factors include low labour costs, government led incentives like low-cost loans and subsidised rent.

Push technology factors include non-availability of broadband services while an example of a pull technology factor is the excellent communication and network system in a location due to a high concentration of technology businesses. Hence the benefits to the business are immense and affordable.

Push infrastructural factors include poor road or rail networks or the lack of a local airport. Pull infrastructural factors include excellent support services, and communication systems.


There are other factors that affect the location of a business. These include:

• The Workforce - The business needs to have access to the best and highly skilled employees
• Land - Affordability of rent, scarcity and high poverty prices affect the choice of land
• Raw Materials - This will reduce the costs of travelling to the source of the resource. Furthermore, it's time efficient
• Proximity to the market - The distance to the target is very important. It reduces transportation costs and enhances the quality of the products. For instance, with goods that have short shelf life duration, it's a smart idea for the business to be close to the target market for it's produce

Despite the above factors already mentioned, there are businesses that are not particularly affected by push-pull factors. 

These include mobile businesses that supply intangible goods, online businesses that do not require a physical location and businesses that remain in a location regardless of the degenerative conditions of the area over a period of time. The last point is referred to as industrial inertia. 

Activity 25 - Think about a type of business in your area. What push and pull factors do they experience?