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Location Strategy

Location decisions are crucial for any company as they impact costs, labor force characteristics, and market proximity. Selecting the right location involves evaluating various factors such as labor productivity, exchange rates, and tangible and intangible costs. Additionally, analyzing government incentives and the suitability of sites through methods like factor rating and break-even analysis is essential. This strategic approach ensures firms maximize benefits, minimize costs, and enhance competitive advantages in their respective markets, thereby making informed and impactful decisions.

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Location Strategy

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Presentation Transcript

  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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