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
Objective: maximize benefits of location
to the firm
Choosing a Country






Government
Culture and economics
Market locations
Labour
Availability of Inputs
Exchange rate
Choosing a Community








Corporate desires
Attractiveness
Labour
Utilities
Environmental Regulations
Government Incentives
Proximity
Land and Construction Costs
Choosing a Site





Size and Cost
Air, rail, highway, waterway systems
Zoning restrictions
Nearness of services and suppliers
Environmental impact
Evaluating Location
Alternatives

How do we choose between locations?
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
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
Break-Even Analysis
Annual Cost
200000
150000
100000
50000
Akron
lowest
cost
0
0
Bowling Green
lowest cost
Chicago
lowest
cost
500 1000 1500 2000 2500 3000
Volume
Center of Gravity Method
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