The Importance of Market Analysis in Location Decision

Businesses of all sizes and across a broad range of industries are increasingly aware of the need to effectively assess data and economic trends to understand the local market in order to make sound decisions about where to locate their operations. Market analysis in location decision-making is no longer simply defined by traditional demographics, but now has gone far beyond this, in order to help businesses to be more agile and strategically informed. This article will illustrate the importance of market analysis in location decisions and provide practical advice on how businesses can get the most out of such analysis.

What is Market Analysis?

Market analysis is the approach businesses use to assess and understand the dynamics of the local market in order to make informed decisions about a variety of things, including the selection of a location for their operations or expansion. Such analysis helps to identify the strengths and weaknesses of a market, including potential customer or supplier base, competition, economic indicators, cost of labour, and availability of resources.

The Benefits of Market Analysis

There are numerous advantages to implementing market analysis into location decisions. These include:

    • Helps to reduce the risk of investing a company’s resources into a location that is not suitable
    • Enables businesses to identify where their target customer or audience is most likely to be located
    • Allows businesses to identify the local competition, opportunities for synergy, and potential sources of supply
    • Gives businesses an understanding of the economic environment and trends in the local market
    • Enables businesses to calculate an appropriate budget for their operational costs, including labour, rent, and materials
    • Helps businesses to identify areas with stronger population growth, higher incomes, and greater technology and infrastructure development

What kind of Information to Look for in Market Analysis?

In order to get the most from market analysis in location decisions, there are a number of data points which need to be assessed. This includes population and demographic characteristics, economic indicators such as GDP growth and unemployment rate, cost of living, transportation and logistical networks, availability of resources, workforce size and quality, the potential customer or supplier base, and the competitive landscape. Insights on Investment and Growth for UK Landlords in the rental business.

What Tools are Used for Market Analysis?

Business can gain access to a range of tools to conduct their market analysis and collect the data mentioned above. These tools can range from more basic documents that provide statistical data such as census records to tools such as GIS mapping technology which provides the abilty to overlay data onto a geographical map.

How to Interpret the Results?

Once a business has gathered the data and conducted the analysis, it must be interpreted correctly in order to make sound location decisions. This requires that the business also take into account the company’s own strategy and objectives when assessing the data and viewing the results.

Common Mistakes to Avoid

When it comes to market analysis, there are a number of common mistakes that businesses should avoid in order to get the most out of their analysis. These include:

    1. Not triangulating data sources in order to establish a more balanced and accurate view of the local market.
    1. Focusing too much on the data and not understanding the needs of the business and the target customers.
    1. Failing to consider the long-term effects of decisions being made in the light of market conditions.
    1. Not taking into account the law of diminishing returns and the need for businesses to constantly update their strategy in response to shifting market dynamics.
    1. Failing to leverage insights from data into consumer behaviour in order to better understand the needs of the target customer and how to best position the business against the competition.

Where to Find Help?

Businesses that are unsure of how to effectively conduct market analysis for location decisions can access a range of tools and resources on the web to guide their approach. Additionally, there are also a host of firms which offer specific services in business intelligence and market analysis that can help organisations to take their location decision-making process to the next level.


The importance of market analysis in location decisions cannot be understated. It provides a comprehensive picture of the local market, including the opportunities and risks, enabling businesses to make informed decisions that can affect their bottom line. Market analysis is a powerful tool which, when used correctly, can help businesses to remain competitive and successful in an ever-changing and dynamic market landscape.

What information is gathered during a market analysis for a location decision?

A market analysis for a location decision often involves collecting information about the local population, such as demographics, employment trends, economic factors, infrastructure developments, and the competition landscape. Information regarding the target customers and their needs is also gathered, as well as data about the location’s potential for profitability and growth. Additional data collected may include rental rates, local transportation, taxes, occupancy costs, access to resources and labor availability.

What factors should be considered in a market analysis for location decisions?

1. Industry Demand: It is important to understand what type of industry is thriving in the location and what the demand is for the type of business you plan to open.

2. Labor Market: It is critical to understand the available labor force in the location you’re considering. Are there an adequate number of qualified employees and will you have access to them?

3. Delivery & Logistics: It is important to understand the cost and availability of shipping options for your products or materials.

4. Consumer Demographics: Knowing the consumer demographics of the area can help you determine potential customer base, as well as the demand for the type of product or service you plan to offer.

5. Competition: Knowing the level of competition in the location is essential. How will your business stand out against its competitors?

6. Location Cost: Consider the overall cost of the location you are considering. This includes rent, taxes, utilities, and other data points related to the specific area.

7. Infrastructure & Ease of Access: What is the local infrastructure like? Is the location easy to access and is it well connected to other areas?

8. Regulatory Framework: It is important to understand the local regulations that may impact your business. What are the zoning requirements, business taxes, and any other applicable regulations?

What information is needed for a market analysis?

1. Potential market size and current industry trends

2. Competitor analysis: assessing competitors’ strengths and weaknesses

3. Demographic information about potential customers and their buying patterns

4. Market segmentation: identify target customer segments and how to reach them

5. Economic conditions: assessing the impact of the current economic climate

6. Pricing strategies: determining the optimal pricing to maximize profits

7. Distribution channels: determining which outlets and methods to use when distributing the product or service

8. Current and emerging trends: identifying trends in consumer behavior and their influence on the market

9. Advertising strategies: determining the best way to promote and increase brand presence in the market.

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