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Objective of Location Strategy

Objective of Location Strategy. Chapter 11. Add value by maximizing the benefit of location to the firm. Learning Points. To identify different impact location decisions will have on service businesses compared with other businesses

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Objective of Location Strategy

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  1. Objective of Location Strategy Chapter 11 Add value by maximizing the benefit of location to the firm

  2. Learning Points • To identify different impact location decisions will have on service businesses compared with other businesses • To identify which are the significant factors affecting location decisions • To understand the main location evaluation techniques • To understand basic layout types

  3. Location is a majorcost factor • Location affects shipping/transportation costs • Location affects production costs (cost of labour varies, overhead costs vary) • Costs can vary greatly between locations

  4. Location is a major revenue factor for service businesses • Location impacts on amount of customer contact • Location impacts on volume of business • Actual costs can vary little between locations

  5. Factors varying by country • Government rules, attitudes, political risk, incentives • Labour availability, attitudes, productivity, and cost • Market location • Culture & economy • Availability of supplies, communications, energy • Exchange rates and currency risks

  6. Regional factors • Attractiveness of region (culture, taxes, climate, etc.) • Labour, availability, costs, attitudes towards unions • Costs and availability of utilities • Environmental regulations of region and locality • Government/regional incentives • Proximity to raw materials & customers • Land/construction costs • Executive tastes

  7. Site factors • Site size and cost • Air, rail, highway, and waterway systems • Nearness of services/supplies needed • Environmental impact issues

  8. Location Evaluation Methods • Factor-rating method • Locational break-even analysis • Centre of gravity method • Transportation model

  9. Basic Types of Layouts • Process Layout • machines grouped by process they perform • Product Layout • linear arrangement of workstations to produce a specific product • Fixed Position Layout • used in projects where the product cannot be moved * Cellular Layout • Consists of different machines brought together to make a product

  10. Summary • Location decisions have major impact on revenue potential for services • Location factors can be identified in terms of their impact on the supply side (cost of land or transport) or on the demand side (customer convenience, labour skills) • Four main location evaluation methods • Layouts may be product, process, fixed position or group in structure

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