CHAPTER 8 - LOCATION PLANNING AND ANALYSIS

THE NEED FOR LOCATION DECISIONS

-Existing organization may need to make location decisions for a variety of reasons. Firms such as banks, fast-food chains, supermarkets, and retail stores view locations as part of marketing
strategy.

THE NATURE OF LOCATION DECISIONS

Strategic Importance of Location Decisions

- Location decisions are closely tied to an organization's strategies.
Objectives of Location Decisions
- As a general rule, profit-oriented organizations base their decisions on profit potential, where as nonprofit organizations strive to achieve a balance between cost and level of customer service
they provide.
Location Options
- Managers of existing companies generally consider four options in location planning.

GENERAL PROCEDURE FOR MAKING LOCATION DECISIONS

1.) Decide on the criteria to use for evaluating location alternatives, such as increased revenues or community service.
2.) Identify important factors, such as location of markets or raw materials.
3.) Develop location alternatives:
a. Identify the general region for a location
b. Identify a small number of community alternatives.
c. Identify site alternatives among the community alternatives.
4.) Evaluate the alternatives and make a selection.
Step 1 is simply a matter of managerial preference. Steps 2 through 4 may need some elabiration.

FACTORS THAT AFFECT LOCATION DECISIONS

Regional Factors
Location of Raw Materials
Location of Markets
Labor Factors
Climate and Taxes

Here are some of the ways business use geographical information systems. (GIS)
* Logistics companies * Insurance companies
* Publishers * Retailers
* Real estate * Utility companies
* Banks * Emergency services

Community Considerations
- Many communities actively try to attract new businesses, offering financial and other incentives.

Site-Related Factors
*Regional: Location of raw, materials or supplies, Location of markets, Labor
*Community: Quality of life, Services, Attitudes, Taxes, Environmental regulations, Utilities, Development support
*Site: Land, Transportation, Environmental/legal

Multiple Plant Manufacturing Strategies

-> Product Plant Strategy
-> Market Area Plant Strategy
-> Process Plant Strategy
-> General-Purpose Plant Strategy

SERVICE AND RETAIL LOCATIONS

- Service and retail are typically governed by somewhat different considerations than manufacturing organizations.

GLOBAL LOCATIONS
- Globalization has opened new markets and it has meant increasing dipersion of manufacturing & service operations.

Facilitating Factors
Trade Agreements
Technology
Benefits
Market
Cost savings
Legal and regulatory
Financial
Other
Disadvantage
Transportation costs
Security costs
Unskilled labor
Import restrictions
Criticisms
Risks
Political
Terrorism
Economic
Legal Laws
Cultural

Managing Global Operations

- Although there are many benefits of global operations, these operations often create new isaues.

EVALUATING LOCATION ALTERNATIVES

Location Cost-Profit-Volume Analysis
The Transportation Model
Factor Rating
The Center of Gravity Method