Location Strategies

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Location Strategies
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Location Decisions

• Long-term strategic decisions.
• Usually expensive difficult to reverse.
• Affect fixed variable costs.
• Transportation cost is up to 25 of product
  price.
• Other costs Taxes, wages, rent etc.
• Objective Maximize benefit of location to firm.

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Some of the objectives in facility location
decisions (1) It must first be close as
possible to raw material sources and
customers (2) Skilled labor must be readily
available in the vicinity of a facilitys
location (3) Taxes, property insurance,
construction and land prices must not be too
high (4) Utilities must be readily available
at a reasonable price (5) Local, state and
other government regulations must be conducive to
business and (6) Business climate must be
favorable and the community must have adequate
support services and facilities such as schools,
hospitals and libraries, which are important to
employees and their families.
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Industrial Location Decisions

• Cost focus.
• Revenue varies little between locations.
• Production separate from consumption.
• Location is major cost factor.
• Costs vary greatly between locations.
• Shipping costs.
• Production costs (e.g., labor).

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Service Location Decisions

• Revenue focus.
• Costs vary little between market areas.
• Production/service together with consumption.
• Location is a major revenue factor.
• Affects amount of customer contact.
• Affects volume of business.

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Some of the objectives in facility location
decisions (1) It must first be close as
possible to raw material sources and
customers (2) Skilled labor must be readily
available in the vicinity of a facilitys
location (3) Taxes, property insurance,
construction and land prices must not be too
high (4) Utilities must be readily available
at a reasonable price (5) Local , state and
other government regulations must be conducive to
business and (6) Business climate must be
favorable and the community must have adequate
support services and facilities such as schools,
hospitals and libraries, which are important to
employees and their families.
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Organizations That Locate Close to
Markets/Customers

• Government agencies.
• Police fire departments, post offices, public
  libraries.
• Retail sales and Services.
• Fast food restaurants, supermarkets, gas
  stations.
• Doctors, lawyers, barbers, banks, auto repair,
  etc.
• When transporting finished goods is more
  expensive than transporting materials.
• Bottling plants, breweries.
• Electricity production.

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Organizations That Locate Close to Suppliers or
Materials

• By necessity.
• Mining, fishing, farming, etc.
• When transporting materials is more expensive
  than transporting finished goods.
• Perishable raw materials.
• Seafood processing.
• Heavy or bulky raw materials.
• Steel producers.
• Processing reduces bulk.
• Lumber mills, paper production.

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Location Decision Sequence
Region/Community
Site
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Factors Affecting Country Decision

• Government rules, attitudes, stability,
  incentives.
• Labor availability, attitudes, productivity,
  cost.
• Availability of supplies, communications, energy.
• Culture economy.
• Location of markets.
• Exchange rate.

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Factors Affecting Region/Community Decision

• Labor availability, costs, attitudes towards
  unions.
• Proximity to customers suppliers.
• Costs and availability of utilities.
• Land/construction costs.
• Government incentives (taxes).
• Environmental regulations.
• Corporate desires.
• Attractiveness of region (culture, climate,
  etc.).

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Factors Affecting Site Decision

• Access to air, rail, highway, and waterway
  systems.
• Proximity to needed services/supplies.
• Site size and cost.
• Zoning restrictions.
• Environmental impact issues.

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Location for Service Organizations

• Focus on Revenue and Volume of Business, which
  are determined by
• Purchasing power and demographics of customer
  drawing area.
• Competition in the area (amount and quality).
• Relative attractiveness of the firms and
  competitors locations.
• Uniqueness of location and offerings.
• Physical qualities of facilities and neighboring
  businesses.
• Operating policies and quality of management.