Chapter8

							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
Factors
   Labour Productivity
   Exchange Rates
   Tangible Costs
   Intangible Costs
   Attitudes
   Proximity to Markets
   Proximity to Suppliers
   Proximity to Competitors
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
              200000

              150000
Annual Cost




              100000

              50000        Akron     Bowling Green   Chicago
                           lowest    lowest cost     lowest
                           cost                      cost
                  0
                       0   500 1000 1500 2000 2500 3000
                                    Volume
Center of Gravity Method
Transportation Model
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