Facilities

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Facilities
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Content

• Regional location
• Costs
• Resources
• Infrastructure
• Market
• Government intervention
• Qualitative factors
• Analysis of factors
• International location
• Multinational strategies

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Regional Location

• Businesses need to choose which regional
  locations are best for their operations
• There are a number of factors that impact
  regional location
• Location is based on a combination of
  quantitative (measurable) and qualitative factors

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Costs of location

• Cost of land varies between locations
• Costs of labour and services also vary
• The choice of business location therefore affects
  profitability

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Resources

• The availability of resource can influence
  location
• These may be natural resources or could be
  technological resources
• Businesses often cluster together in areas where
  there is particular expertise e.g. hi-tech
  organisations are centred on the M4 corridor in
  the UK

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Infrastructure

• Infrastructure refers to energy and transport
  facilities
• These factors influence the ease, speed and costs
  of production
• The impact of infrastructure on firms is
  dependent on the type of business and their needs
  

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Market

• Location of the market may influence location
  choice
• For some businesses it is important to be close
  to the market
• If businesses dont need to be close to their
  market they may need to have good access to the
  market

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Government Intervention

• Government grants are offered in certain areas
  these make the area more attractive to businesses

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Qualitative factors

• Businesses may also consider qualitative factors
  including
• Quality of life
• Image
• Ethical issues

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Analysis of Factors

• Businesses will use a number of methods to
  analyse the best location
• Break even analysis they will calculate costs
  and revenues to see how many units they need to
  break even.
• If fixed costs (e.g. rent) are lower in one
  location than another this will reduce break even
  output
• If variable costs (e.g. wages) are lower in one
  location than another this will reduce break even
  output
• The greater the margin of safety at a particular
  location the lower the risk

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Investment Appraisal

• Businesses can use investment appraisal
  techniques such as payback, ARR and NPV to see
  which location is best
• Businesses usually select the option with the
  quickest payback, the highest ARR and the highest
  NPV

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Types of Location Decision

• Organisations have a number of different location
  decisions
• Where to locate their business when they start up
• Relocation
• Expansion

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Multinational Location

• Multinational businesses locate in more than one
  country
• If you locate overseas you need to consider
  additional factors

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Why locate overseas?

• Businesses often locate overseas to
• Exploit lower costs
• Benefit from less regulation
• Benefit from cheaper labour
• Use minerals / resources in a country
• Exploit market opportunities overseas
• To be closer to overseas customers
• To overcome protectionist trade barriers
• To decrease trade union power
• To decrease exchange rate problems

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Summary

• Businesses need to consider a number of factors
  when considering location
• Costs looks at the cost of land and labour if
  these are lower profitability increases
• Businesses often locate near resources
• Infrastructure is transport and energy support
  for the business
• Some businesses need to be close to their markets
• Government grants act as incentives for
  businesses to locate in specific areas
• Qualitative factors may also have an impact on
  choice of location
• Analysis of factors businesses use break even
  analysis and investment decision making to decide
  which location to choose
• There are a number of factors which influence
  companies to locate overseas including decreased
  costs and to overcome trade barriers