Study Notes

Operating a Multi-site Business

Level:
AS, A-Level
Board:
AQA, Edexcel, OCR, IB

Last updated 22 Mar 2021

Many businesses start and continue to trade from just one business location. However, for others, the growth of the business necessitates the opening of locations on more than one site.

For example:

  • A retailer who expands by launching the same format in other locations nearby and then across the UK
  • A manufacturer who establishes regional distribution centres
  • A franchisor that expands by selling geographical territories to franchisees
  • A financial services business that opens a call centre operation overseas

In all these and other examples, the decision to operate multi-site creates opportunities and issues in relation to the four main functional areas. A summary of the main points is provided below.

Advantages of multi-site locations

  • Most importantly – closer to customers; the business operates in the geographical markets when it can compete
  • Greater potential for promotion amongst junior management
  • Recruitment may be easier, particularly is done locally
  • Marketing and management economies of scale – costly resources can be spread across more business locations, customers and revenues
  • Easier to flex capacity – by adding or removing locations
  • Less risk of the business disruption from problems at just one location
  • Better understanding of local market cultures & conditions

Disadvantages of multi-site locations

  • Potential duplication of activities (diseconomy of scale)
  • Harder to control operations – though IT systems can make this much easier
  • Communication across the business is more challenging
  • Increased strategic risk – the risk that the business does not understand the local market which it is entering

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