What is a soft infrastructure

Soft location factors contribute to the attractiveness of locations

Location factors are decisive for the attractiveness of a location. Above all, companies pay very close attention to the location factors before they settle in a location. These can have a major impact on the profitability of a company.

However, not all location factors are equally important. A basic distinction is made between hard and soft location factors.

Hard location factors can be included directly in the market and location analysis for a company. Although soft location factors cannot be integrated into a company's cost accounting, they are becoming increasingly important.

The soft location factors are not only interesting for entrepreneurs. They also improve the quality of life for citizens and are therefore important to everyone.

Soft vs. hard location factors

A general distinction is made between soft and hard location factors.

Hard location factors serve to determine the economic viability of locations. They are mostly calculated on the basis of business cost and sales ratios. In many cases, the hard location factors are an absolute prerequisite for setting up a company.

The hard location factors include, for example, taxes, levies, subsidies, the sales market, the infrastructure and the availability of resources.

In contrast to the hard location factors, the soft ones are very difficult to measure. Often their meaning and importance depend on subjective assessments. Nevertheless, they can be decisive for a company's decision to settle.

The importance of soft location factors continues to increase. This is often justified by the fact that all important hard location factors are equally present everywhere in Central Europe.

Soft location factors are, for example, the cultural offerings, the educational offerings, the number and qualifications of the available employees and business contacts.

What are soft location factors?

A distinction can be made between two different types of soft location factors. On the one hand there are the soft, company-related and on the other hand the soft, personal factors.

Company-related factors are directly relevant to a company's competitiveness. This can be, for example, the economic climate of a city or region: How quickly are inquiries answered? How long does it take to process applications?

It is very important for all companies that the regulatory hurdles at a location are not too high. Because not only time plays an important role here: All types of permits are the basis for efficient work for every company. Cities like Munich are therefore particularly attractive for companies: leading DAX companies are already based there, the authorities are already familiar with dealing with companies and generally do not stand in the way of start-ups or relocations.

At the same time, the image of the city or the region also plays a major role. Other company-related factors are university and research institutions, an innovative milieu and the efficiency of the business associations.

The personal, soft factors are particularly important for the quality of life of the employees. Accordingly, they include the quality of living, the living environment, the quality of schools and training centers, the social infrastructure, the environment and leisure activities.

Soft location factors are becoming more and more important: A summary

Since the hard location factors are sufficiently available almost everywhere in Europe, companies are increasingly concentrating on the soft factors when choosing their location.

Not only the image of the city and the industry advantages play an important role, but also the quality of life of the citizens and employees.

However, hard and soft location factors are weighted differently by companies. Depending on the industry and size of a company, the importance of individual factors is often greater than their quantity.

Companies from the industrial sector, for example, are paying more attention to hard factors such as infrastructure. The Ruhr area and other metropolitan areas in Germany are very popular in this sector.

Young entrepreneurs who come up with new business models need an open-minded clientele to go there. This is why many start-up companies are settling in young cities like Berlin that want to reach young people in particular with new ideas.

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