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The geographical position of a firm’s premises, or the marketing position of its product. The aspects of geographical position which matter vary with the business. For example, hotels benefit from the proximity of natural features or man-made attractions. For distribution and commerce, easy access to transport facilities is important. For some financial firms the proximity of other firms is vital: witness the agglomeration of banks and other financial businesses in Wall Street or the City of London. The location of a firm’s product in marketing terms involves the brand image, perception of quality relative to rivals, and pricing strategy. The choice of these characteristics will influence profitability. As changing position is expensive, both geographically and in marketing terms, the location of production is strongly influenced by history — a prime example being the chance factors that led to the establishment of Silicon Valley in California.

Reference: Oxford Press Dictonary of Economics, 5th edt.