Location Strategy
Introduction
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What – Location Decisions
Where – Important to company
Why – Costly to change
Why is Location Important?
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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
Factors
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Labour Productivity
Exchange Rates
Tangible Costs
Intangible Costs
Attitudes
Proximity to Markets
Proximity to Suppliers
Proximity to Competitors
Choosing a Country
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Government
Culture and economics
Market locations
Labour
Availability of Inputs
Exchange rate
Choosing a Community
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Corporate desires
Attractiveness
Labour
Utilities
Environmental Regulations
Government Incentives
Proximity
Land and Construction Costs
Choosing a Site
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Size and Cost
Air, rail, highway, waterway systems
Zoning restrictions
Nearness of services and suppliers
Environmental impact
Evaluating Location
Alternatives
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How do we choose between locations?
Factor Rating
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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
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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
Transportation Model
Service Location Strategy
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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