The location of an industrial unit is an important problem which its promoters have to deal with. It is the responsibility of the promoters to search out that location at which the unit will have easy access to raw materials, labour, power, market and certain services like banking, transportation, communication, insurance and warehousing. As far as possible, the location must be optimum so that the cost of production and distribution are the lowest. If the location of a plant is not suitable, it may cause many problems. For instance, transportation cost may be higher and the right type of labour may not be available. It will also restrict the growth of the firm.

Decision about location of plant or business premises has long-term implications. Errors in location are very difficult and expensive to rectify. It is not easy to change plant location if it is facility. It would involve huge cost. It should also be noted that plant location has also bearing on the layout of machinery and equipment and the process of production. The objective of location planning is to find out the optimum location for the particular plant. Such a allocation should not only result in lowest cost per unit but also facilitate orderly growth of the firm. In other words, locational decision plays a crucial role in the success and growth of a firm.

The problem of location is faced not only by new concerns but also by the running concerns which have growth plans. The growing concerns have to take decisions about the location of their new plants and sometimes, they are also faced with the problems of shifting the entire operations to a new place because of limitations of existing location and accommodation. Therefore, the new concerns should also take into consideration the growth factor and the possibility of changes in the environmental conditions while selecting the location.

There are no hard and fast rules with regard to location of a plant. In practice, a large number of factors have to be considered while choosing a suitable location. Moreover, these differ from situation and form time to time. That is why different economists have taken into consideration different factor to formulate their theories of location explain the mechanism of location of industries. The study of these factors will help in determining the most suitable location of new plant and also analyzing the tendency of certain industries to locate in particular regions of the country.

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