In a metropolitan area, it was very difficult for Shakespeare to give us a story about the domestic problems of a general. Had the play been set in Venice, the focus would have been and should have been upon the professional life of the general. By moving the play to a city located on margin, Shakespeare had a liberty to talk about the domestic chores of Othello. Similarly, moving the play from the capital to an island also gives an opportunity to seclude both Othello and Desdemona. Moreover, Iago will have more opportunities to have interaction with Othello on a personal level. And eventually, had the play been in Venice, a person like Othello, suffering from inferiority complex, might not be able to kill the daughter of an influential man.
The journey to Cyprus also serves the purpose of the writer. We see that ships of Othello and Desdemona are parted from each other, hence giving the audience a foresight into the separation between Othello and Desdemona that is eventually going to take place.