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Location Strategy

Location Strategy. Introduction. What – Location Decisions Where – Important to company Why – Costly to change. Why is Location Important? . Affects costs Costs of inputs depend on region Characteristics of labour force depend on region Difficult to change once decision made

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Location Strategy

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  1. Location Strategy

  2. Introduction • What – Location Decisions • Where – Important to company • Why – Costly to change

  3. Why is Location Important? • Affects costs • Costs of inputs depend on region • Characteristics of labour force depend on region • Difficult to change once decision made • Objective: maximize benefits of location to the firm

  4. Factors • Labour Productivity • Exchange Rates • Tangible Costs • Intangible Costs • Attitudes • Proximity to Markets • Proximity to Suppliers • Proximity to Competitors

  5. Choosing a Country • Government • Culture and economics • Market locations • Labour • Availability of Inputs • Exchange rate

  6. Choosing a Community • Corporate desires • Attractiveness • Labour • Utilities • Environmental Regulations • Government Incentives • Proximity • Land and Construction Costs

  7. Choosing a Site • Size and Cost • Air, rail, highway, waterway systems • Zoning restrictions • Nearness of services and suppliers • Environmental impact

  8. Evaluating Location Alternatives • How do we choose between locations?

  9. Factor Rating • Develop list of factors • Weight each factor • Develop scale for each factor • Score each location for each factor • Multiply score by weights • Sum points

  10. Break-Even Analysis • Determine fixed and variable costs for each location • Plot costs vs volume • Select location with lowest total cost for expected production volume

  11. Chicago Bowling Green Bowling Green lowest cost Akron lowest cost Chicago lowest cost Break-Even Analysis 200000 Akron 150000 Annual Cost 100000 50000 0 0 500 1000 1500 2000 2500 3000 Volume

  12. Center of Gravity Method

  13. Transportation Model

  14. Service Location Strategy • Maximize volume of business and revenue • Purchasing Power • Compatibility with demographics • Competition • Quality of Competition • Uniqueness of location • Physical qualities of facilities • Operating Policies • Quality of Management

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