Selection of the site for an industrial plant is governed by many considerations, both the economic analysis of the costs as well as judgment as to the modifying effects of other factors. First, the costs of land, labour, materials, taxes, heat, light and power should be calculated and the costs of marketing from that place should be estimated.

Then the total costs of each site for an industrial plant should be compared. This comparison would give an idea about primary considerations regarding selection of the site for an industrial plant. But this is not enough. There are other considerations which are more the matter of judgment rather than mathematical calculations, but have considerable effect on the smooth working of the business unit.

In the words of Kimball and Kimball, “The need of pure water (most important for paper mills), the necessity of disposing of large amounts of waste, the problem of smoky chimneys, the attitude of neighbouring communities, the attitude of local labour, the necessity of nearby banking facilities and supply of capital” are the various modifying factors.

These must be evaluated while analysing the bare economic aspects of the case of any site.


In the light of general discussion of the factors influencing the industrial location we can list the following criteria for selecting the exact site for an industrial plant:

(a) Land:

Suitability, adequacy, and comparable cost of the sites to install the plant and to expand it whenever feasible.

(b) Buildings:


Availability of buildings for housing the industrial equipment and the reasonableness of rent or cost of new constructions.

(c) Labour:

Availability and wage rates of the skilled, semi-skilled, un-skilled person is required.

(d) Transport:


Regular and sufficient transportation facilities for delivery of materials, despatch of finished products and for the use of the employees.

(e) Ancillary Industries:

The availability of service or ancillary industries.

(f) Market:


Size of the local market and the cost of transporting to central markets vis-a-vis the extent of demand.

(g) Other Facilities:

Character of community regarding taxes, legal regulations, public up lift services, financial facilities, educational opportunities, etc.

Comparative Advantages and Disadvantages of Different Sites:


The relative importance of different considerations which influence the selection of site for an industrial plant can be obtained by comparing the relative merits and demerits of the following three classes of sites – (i) city; (ii) country (rural area); and (iii) suburban (sites in the suburbs of big cities).

Relative Merits and Demerits of Sites in a City:


(1) There is adequate supply of labour, both skilled and unskilled, male and female.


Reasons for this adequate supply are:

(a) All the advantages of a specialised and developed area are available to people in a city.

(b) Educational opportunities such as schools and colleges for children of the employees, evening or night schools and colleges for workers, training classes for supervisory staff (foremen and others) and discussion clubs for executive officers are readily available.

(c) Recreational facilities are in plenty.


(2) Allied, subsidiary industries and servicing centres are present in plenty.

(3) Financing institutions such as banks, underwriting houses are nearby.

(4) Large local market for the products of industries operating on small- scale in particular is available.

(5) Relatively better transportation facilities by road, rail, water (and air) are available.

(6) There is possibility of special inducement such as exemption from taxes, cash bonus etc. for starting new establishment.

(7) In case of small units dependent on other industries such as repair shops or closely articulated industry city offers additional advantages because such industries are many in cities.


(8) Advantages of municipal services such as good streets, drainage system, gas and water supply, police protection, fire fighting facilities are all available.


(1) Land is usually costly.

(2) For a large-scale unit it is often difficult to get a suitable site in a city where building suitable for the purpose of the undertaking can be built at reasonable costs.

(3) As cities grow rents and taxes tend to increase making the costs of operation higher.

(4) Due to high cost of living wages of labour are relatively higher.


(5) Employer-employee relations are less friendly.

(6) There are many municipal restrictions regarding smoke from chimney, disposal of affluent water and wastages, etc.

Advantages and Disadvantages of Sites in Countryside:


Though advantages of a site in the countryside are not numerous, they are of paramount importance.

These may be summarized as under:


(1) Given the availability, of water, power, or supply of pure water a countryside is most desirable, particularly for industries such as paper mills.

(2) Abundant supply of land at relatively cheap rate makes it suitable for large units which need more lands for building. Provision for expansion can be made for further growth.

(3) Taxes are low.

(4) Undesirable manufacturing and other restrictions of municipal government are absent.

(5) Undesirable industrial units in the neighbourehood and other unwanted neighbours can be easily avoided.

(6) There is less labour trouble.


(7) Danger from fire and other hazards resulting from surrounding industrial units are minimised.


(1) Labour supply is a problem. This is particularly so in regard to skilled labour, due to lack of educational and amusement facilities in the countryside.

(2) In case skilled labour force is attracted by providing housing colony, schools etc. at the factory site costs of establishing the industry becomes higher at the start.

The Suburban Sites:

The sites in the suburbs of many cities possess benefits of both the city and countryside whereas they are free from the disadvantages of both. Hence they offer a compromise between the city and the countryside.


Advantages are as under:

(1) Land is relatively cheap

(2) Adequate supply of land for the construction of one storey building.

(3) Taxes are comparatively low.

(4) All the advantages of city can be availed of due to city bus service and automobiles.

(5) Living in the suburbs is cheaper than the city while attractions of the city are available.


The selection of specific site is the result of a compromise between various considerations. The economic survey of carefully assorted groups of industrial units of varying sizes go to suggest that cities offer special advantages to the business units operating on small-scale, the suburbs of big and medium sized cities are best suited to the fair-sized units and the sites in the rural areas (or countryside) are specially suitable for such large-scale units which can obtain required labour supply by building their own factory colonies or townships.