Location planning for businesses comes with certain deciding factors and influences, including the rent, regional demographics and competitor location.

If a business’s customers are based in a particular geographical location, it makes sense to locate that business where its clientele can visit it. Setting up near a competitor may also be a smart move if the local infrastructure is set up to the unique needs of that business. It is a complex decision-making process that will require thorough scenario building and analysis.

There are various effects that rival businesses might have on your business from a demographic standpoint:

Innovation – Healthy competition encourages innovation to distinguish a company from others. It will also help a business to avoid complacency as it attempts to keep one step ahead from the competition.

Customer service – A business will be forced to compete for customers, leading to improved customer service to attract a loyal customer base.

Understanding the core market – Competition forces a business to pay attention to its core audience. Whether that is a specific demographic or geographic location, market challenges in that particular setting will encourage a business to focus on its target audience and better provide for customers.

Education – Having a nearby competitor can help a business gain valuable insights into the marketplace and see what works, and what does not.

Collaboration – Proximity to competitors also facilitates the sharing of information, and clusters of competitive businesses often form new business partnerships using their combined power to leverage economies of scale.

The Business of Clusters

Business clusters occur when similar companies are found in the same location; a concentration of similar industries has unique business benefits:

As a cluster takes root, this attracts even more companies and this, in turn, attracts highly skilled employees. This creates a snowball effect where more companies make the decision to set up in the same location where the talent is pooling.

Research has found that, when compared with non-clustered companies, businesses located in clusters grow faster, so maybe by setting up next to a competitor, they could evolve from a competitive enemy into a company’s biggest business ally.