location decision
TRANSCRIPT
![Page 1: Location decision](https://reader035.vdocuments.site/reader035/viewer/2022062513/554d833cb4c9053e0c8b51bb/html5/thumbnails/1.jpg)
Location Planning and Analysis
![Page 2: Location decision](https://reader035.vdocuments.site/reader035/viewer/2022062513/554d833cb4c9053e0c8b51bb/html5/thumbnails/2.jpg)
Need for Location Decisions
• Marketing Strategy
• Cost of Doing Business
• Growth
• Depletion of Resources
![Page 3: Location decision](https://reader035.vdocuments.site/reader035/viewer/2022062513/554d833cb4c9053e0c8b51bb/html5/thumbnails/3.jpg)
Nature of Location Decisions
Strategic Importance Long term commitment/costs Impact on investments, revenues, and operations Supply chains
Objectives Profit potential Identify several locations from which to choose
Options Expand existing facilities Add new facilities Move
![Page 4: Location decision](https://reader035.vdocuments.site/reader035/viewer/2022062513/554d833cb4c9053e0c8b51bb/html5/thumbnails/4.jpg)
Types of Facilities
• Heavy Industry Facilities
• Light Industry Facilities
• Retail And service facilities
![Page 5: Location decision](https://reader035.vdocuments.site/reader035/viewer/2022062513/554d833cb4c9053e0c8b51bb/html5/thumbnails/5.jpg)
Making Location Decisions• Decide on the criteria• Identify the important factors• Develop location alternatives• Evaluate the alternatives• Make selection
![Page 6: Location decision](https://reader035.vdocuments.site/reader035/viewer/2022062513/554d833cb4c9053e0c8b51bb/html5/thumbnails/6.jpg)
General Factors affecting location decision
• Availability of basic infrastructure• Basic amenities• Proximity to raw material and markets• Residential complexes, schools, hospitals,
clubs etc.• Availability of cheap labour• Govt. policies• Env. And community• Cheap land
![Page 7: Location decision](https://reader035.vdocuments.site/reader035/viewer/2022062513/554d833cb4c9053e0c8b51bb/html5/thumbnails/7.jpg)
Locating Foreign operations
• Trade barriers• International Customers• International Competition• Regulations• Additional Resources• Low Costs• Offensive in Competitor’s home country
![Page 8: Location decision](https://reader035.vdocuments.site/reader035/viewer/2022062513/554d833cb4c9053e0c8b51bb/html5/thumbnails/8.jpg)
Factors at country level
• Political Risks, Govt. Regulations, attitudes, incentives
• Cultural and economic issues• Labour talent, productivity, cost• Availability of supplies, infrastructure• Exchange rates and currency risks
![Page 9: Location decision](https://reader035.vdocuments.site/reader035/viewer/2022062513/554d833cb4c9053e0c8b51bb/html5/thumbnails/9.jpg)
Location Decision Factors
Regional Factors
Site-related Factors
Multiple Plant Strategies
Community Considerations
![Page 10: Location decision](https://reader035.vdocuments.site/reader035/viewer/2022062513/554d833cb4c9053e0c8b51bb/html5/thumbnails/10.jpg)
Regional Factors
• Attractiveness of region(culture, taxes, climate)
• Labour availability• Location of raw materials• Location of markets• Availability of utilities• Govt. Incentives andpolicies• Climate and taxes
![Page 11: Location decision](https://reader035.vdocuments.site/reader035/viewer/2022062513/554d833cb4c9053e0c8b51bb/html5/thumbnails/11.jpg)
Community Considerations
• Quality of life• Services• Attitudes• Taxes• Environmental regulations• Utilities • Developer support
![Page 12: Location decision](https://reader035.vdocuments.site/reader035/viewer/2022062513/554d833cb4c9053e0c8b51bb/html5/thumbnails/12.jpg)
Site Related Factors
• Land• Transportation• Environmental• Legal
![Page 13: Location decision](https://reader035.vdocuments.site/reader035/viewer/2022062513/554d833cb4c9053e0c8b51bb/html5/thumbnails/13.jpg)
Multiple Plant Strategies
• Product plant strategy• Market area plant strategy• Process plant strategy
![Page 14: Location decision](https://reader035.vdocuments.site/reader035/viewer/2022062513/554d833cb4c9053e0c8b51bb/html5/thumbnails/14.jpg)
Comparison of Service and Manufacturing Considerations
Manufacturing/Distribution Service/Retail
Cost Focus Revenue focus
Transportation modes/costs Demographics: age,income,etc
Energy availability, costs Population/drawing area
Labor cost/availability/skills Competition
Building/leasing costs Traffic volume/patterns
Customer access/parking
![Page 15: Location decision](https://reader035.vdocuments.site/reader035/viewer/2022062513/554d833cb4c9053e0c8b51bb/html5/thumbnails/15.jpg)
Evaluating Locations
• Cost-Profit-Volume Analysis– Determine fixed and variable costs
– Plot total costs
– Determine lowest total costs
![Page 16: Location decision](https://reader035.vdocuments.site/reader035/viewer/2022062513/554d833cb4c9053e0c8b51bb/html5/thumbnails/16.jpg)
Location Cost-Volume Analysis• Assumptions– Fixed costs are constant– Variable costs are linear– Output can be closely estimated– Only one product involved
![Page 17: Location decision](https://reader035.vdocuments.site/reader035/viewer/2022062513/554d833cb4c9053e0c8b51bb/html5/thumbnails/17.jpg)
Example 1: Cost-Volume Analysis
Fixed and variable costs for four potential locations
L o c a t i o n F i x e dC o s t
V a r i a b l eC o s t
ABCD
$ 2 5 0 , 0 0 01 0 0 , 0 0 01 5 0 , 0 0 02 0 0 , 0 0 0
$ 1 13 02 03 5
![Page 18: Location decision](https://reader035.vdocuments.site/reader035/viewer/2022062513/554d833cb4c9053e0c8b51bb/html5/thumbnails/18.jpg)
Example 1: Solution
F i x e dC o s t s
V a r i a b l eC o s t s
T o t a lC o s t s
ABCD
$ 2 5 0 , 0 0 01 0 0 , 0 0 01 5 0 , 0 0 02 0 0 , 0 0 0
$ 1 1 ( 1 0 , 0 0 0 )3 0 ( 1 0 , 0 0 0 )2 0 ( 1 0 , 0 0 0 )3 5 ( 1 0 , 0 0 0 )
$ 3 6 0 , 0 0 04 0 0 , 0 0 03 5 0 , 0 0 05 5 0 , 0 0 0
![Page 19: Location decision](https://reader035.vdocuments.site/reader035/viewer/2022062513/554d833cb4c9053e0c8b51bb/html5/thumbnails/19.jpg)
Factor-Rating Method
• Six steps:1. Develop a list of relevant factors.2. Assign a weight to each factor reflecting its relative
importance to the firm.3. Develop a rating scale for the factors.4. Score each location on each factor based on the scale.5. Multiply the scores by the weights for each factor and total
the weighted scores for each location.6. Make a recommendation based on the maximum point
score, considering other [quantitative?] factors.
![Page 20: Location decision](https://reader035.vdocuments.site/reader035/viewer/2022062513/554d833cb4c9053e0c8b51bb/html5/thumbnails/20.jpg)
Factor Rating Example
![Page 21: Location decision](https://reader035.vdocuments.site/reader035/viewer/2022062513/554d833cb4c9053e0c8b51bb/html5/thumbnails/21.jpg)
Evaluating Locations
• Center of Gravity Method– Decision based on minimum distribution costs
• Load Distance model– Decision based on evaluating potential locations
based on load distance value.