Location of the Industrial unit with respect to the market location and the sources of the raw materials are very important factors. These influence the prices, production and the marketing of the products. Major factors which influences the industrial location are the following :
- Access to raw materials
- Availability of fuel and power
- Clustering of Industries
- Availability of Labour
- Industrial Policies of the Government
(1). Access to the Raw Material:
Production performance of the industries depends on the smooth availability of the raw materials.Thus,the owners prefer those places for their industries which are located at short distance from the sources of raw materials. Easy and cheap access to the raw materials helps to control the cost of manufacturing.
(2). Availability of Fuel and Power:
Availability of fuel and power is also an important factor which controls the industrial location. Thus, the factories are constructed on highways, on the banks of rivers or on the coasts in order to ensure cheap and smooth availability of fuel and power. The fuels include coal, gas, petroleum or electricity.
(3). Clustering of Industries:
In modern industrialized system, the clustering of industries is gaining great popularity because the interdependent industries easily acquire their required raw materials. It is so because the product of one factory becomes the raw material for another industrial unit.
(4). Availability of Labour:
Cheap availability of labour helps to keep the cost of production at low level. Labor wages are low in developing countries. Thus, many major global companies have set up industrial units in Malaysia, Pakistan, Sri Lanka and several other African countries. Cheap labour cost has played key role in controlling the prices.
(5). Industrial Policies of the Government:
Industrial policies of the governments also influence the selection of industrial location. The industrialists have to set up their industries in the regions prescribed by government. Moreover, high taxes and strict government policy also hinder the progress of industries. Similarly government grants and tax exemption also plays an important role in the location of industries. Government build economic zones to encourage the investors to build factories. In these economic zones government provides facilities and cut taxes which motivates the investor to invest.
Apart from these factors, there are some other factors like quality of land, weather and climatic conditions, internet/communication, and personal preferences which determines the location of industries.