AMBO UNIVERSITY WOLISO COMPUS

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT
PROGRAM: MBA IN MANAGEMENT
COURSE TITLE: TECHNOLOGY AND PRODUCTION
MANAGEMENT

COURSE CODE: MGMT 6031

PROGRAM: WEEKEND YEAR: I
SEMISTER: II
ASSIGNMENT TYPE: GROUP 3
Group member Name ID NO
1. Shitaye Amsalu Mamo MGMT-PGW/017/2014
2. Birhana Olkaba Jabessa MGMT-PGW/004/2014
3. Bedasso Habibe Boset MGMT-PGW/002/2014
4. Mengistu Bedada Gename MGMT-PGW/014/2014
5. Muluna Fikadu Ejersa MGMT-PGW/016/2014
6. Marsimo’i Mehessa Tafa MGMT-PGW/015/2014
7. Girma Hordofa Regasa MGMT-PGW/008/2014
8. Tamiru Tesfaye Erana MGMT-PGW/020/2014

SUBMITTED TO: ESAYAS D (PHD).

Table of Contents
1. Introduction............................................................................................................................3
2. Objectives of Facility Location.................................................................................................5
3. Factors Affecting Location Decision........................................................................................6
4. Location Decision Process.......................................................................................................8
5. Location Planning Techniques..............................................................................................10
6. Globalization of Operations...................................................................................................10
7. Conclusion............................................................................................................................13
8. Recommendations..................................................................................................................13
Location Decision in terms of Aman mineral water factory
Introduction

Location Decision in operation management is finding an ideal geographical region to install a

Facility or Plant. It is a vital component in facility planning as it greatly impacts the
organization’s Profitability, Cost and Success. (April 7, 2022 by Anjali)

Existing organization become involved in location decision for a variety of reasons

Opportunity for expanding market share

Business growth in demand

Depletion of Basic resources

Shift in Market /demand

Operating Costs

Merge of companies

Introduction of new product

Interns of Aman mineral water!

In other words, the decision about the area for locating a facility is the Location Decision. It is
also termed as Facility Location and Site Selection.
Here, the term Facility refers to a Plant, Industry, Factory or Manufacturing Unit.

Depending on the business and market conditions, the organizations can have all facilities under
single or multiple units. It includes both the location of the plant and the facilities within the
plant.

Generally, the location decision is taken to set up a new plant, relocate or expand the existing
plant.

The decision depends on several factors that impact the business in the short and long run. These
factors may be the Industry’s size, nature and product.

Objectives of the study

The general objective of the study is to identify Aman mineral water factories location decision
Appropriateness and relating scientifically proved location decision process.

Review of the study

The goal behind selecting a suitable location is to create accessibility to:

1. Customers
2. Workers
3. Transportation
4. Materials, etc.

Installation of facilities involves massive investment and cannot be changed frequently. Due to
poor location decisions, relocating to another place may lead to a heavy investment loss.

Facility location has a significant impact on different types of costs. These costs include Direct,
Indirect, Fixed and Variable costs. The organization aims to deliver products at minimum cost to
its customers.

Therefore, the Industrialists are going for a strategic and logical approach to choose the
best location. It also helps in the smooth and efficient working of the organization.
Objectives of Facility Location

A good site location helps in reducing costs and amplifies the profit earned. The industries invest
their valuable time in search of an ideal site for the following purposes: –

 Revenue Potential from that Site

 Availability of Resources
 Tax advantages
 Reducing Cost and Production Time
 Convenient Transportation Facilities
 Suitable Environment for Employees
 Meet the Maximum Demands of Customers
 Maximum Space Utilization

Facility location is a critical decision area and cannot depend on a single criterion. Essential
criteria for selecting the location of a site are as follows: –

1. Costs
the cost perspective is an essential criterion concerning the location of a facility. Any
wrong decision will adversely impact the company’s finances.
2. Competition

Effective location decision helps in achieving a competitive advantage in the markets. As

Industries can control costs and offer products at reasonable prices to the consumers.

3. Hidden Effects

The plant’s location affects many factors in the long run in a direct or indirect manner. To
remain competitive, organizations must strategically locate their facilities.

Factors Affecting Location Decision

Numerous factors might affect the location decision. The suitable location is determined by
analyzing various factors, parameters and issues. Some of the factors are listed below:
 Product and Industry
The nature of the product impacts the facility’s location. For instance, poultry farms are
established on the outskirts of the city.
 Availability of Resources
the plant must be located close to the suppliers of the raw materials. Because it minimizes
the transportation cost, time and overall cost of production.
 Proximity to Consumers
the organizations offering services may choose to locate facilities near their target
customers. Thus, providing them with an advantage over similar service providers.
 Climate Conditions
manufacturing of some products demands specific climatic conditions. For this reason,
industries are set up in the areas where such climatic condition exists.
  Proximity to Market
the companies producing customized or assembled products are located near their target
market. Consequently, it reduces the time required for products assembling and delivery.
 Regulatory and Policy Issues
The political policies differ in different geographical boundaries. So, the organizations
prefer locations inside open economies having favorable policies.
 Labor Supply
before installing the plant, companies assess the availability of skilled labor. Also, they
ensure the availability of basic necessities for the employee’s survival.
 Free Trade Zones
Free Trade Zones are areas in which one can conduct business free from customs duties.
Thus, it is an essential factor when selecting a site location.
 Infrastructure
Before the installation, Industries must assess the availability of infrastructure in that
region. It may include connectivity via Rail, Roads, Air and Sea.
 Taxes
The tax rates vary within and across the regions. This factor directly impacts the
organizations.

Location Decision Process

Step 1: Investigation

Firstly, the organizations investigate their requirements regarding their location. They conduct an
internal SWOT analysis and decide whether to move, expand or install a new setup.

Step 2: Identification

Post investigation, they try to identify the potential locations for locating the facility. For
example, installing the facility in the Domestic or Foreign regions.

Step 3: Evaluation

The next step in the location decision process is evaluating the potential locations. The
evaluation process may include a detailed comparison of all the alternatives available.
Step 4: Selection

Companies conduct a thorough analysis of the location and government policies in the selected
region. Also, an in-depth evaluation of the merits and demerits of the chosen area.
Therefore, choosing the most appropriate location of the facility for installation.
Model for Assessing Location Competitiveness

This model depicts the levels of competitiveness regarding the facility’s location.

Country Competitiveness

It is the topmost level that analyses the company’s competitiveness in different countries. The
main parameters for the analysis include:

 Government Rules, Policies, Budgets pertaining to the country

 Openness to International Trade

 Availability of Finances

Sector Competitiveness

The second most layer in the model constitutes the sector competitiveness. It helps in analyzing
the attractiveness of the sector to operate. It includes:
  The pool of talent or availability of skilled Labor
 Analysis of the Quality of Infrastructure
 Quality of the Technology

Company Competitiveness

In the last tier of this model, the companies analyze their competitors. It is the analysis of the
company’s abilities to beat the competition. The parameters include:

 Efficiency in Business Management

 Company’s capabilities to design and market the products better than competitors

Location Planning Techniques

Following are the Location Analysis techniques that help in the selection of an ideal location:

1. The Factor Rating Method

2. Location Break-Even Analysis
3. Weighted Scoring Method
4. Center of Gravity Method
5. Transportation Method
6. Load-distance Method

Globalization of Operations

Nowadays, companies are not restricted just local markets. But they are heading towards
international markets to offer their products. Consequently, the globalization of operations is
taking place.

The companies in the developed countries are identifying the potential markets in the developing
countries. Also, they are looking forward to the countries with open economies and free trade
zones.
Hence, globalization of operations is becoming one of the crucial aspects of the business’s
location decision.
Disadvantages of Poor Location Decision

Following are the disadvantages of selecting a poor location of the facility:

 The maintenance of the plant is a constant addition to the cost.

 Purchase of land and construction of infrastructure is an expensive affair.
 Difficulty in marketing and transportation of the products.
 Dissatisfaction among employees and workers.
 Abnormal wastage and delays in the processes.

Example

Sugar Mills
Companies construct Sugar mills close to the Sugarcane farms. Consequently, there is a
reduction in the transportation time and carriage inwards.

Tea Factories
The tea plants need moist soil for their growth. In India, Assam, West Bengal and Karnataka are
some of the major tea producing states.
Hence, most Tea Factories are located in these states due to their climatic conditions.

Methodologies and Analysis

As per attachment here under at the ends of the study direct visit and interview methodology is
used to accomplish this study.

Aman is a natural mineral water facory located at south west side of Addis Ababa 115km far
away at the entrance of Woliso town.

It creates employment opportunities for 25 workers permanent and 52 on contract basis.

It is established on July 26, 2012 E.c

Mission of Aman mineral water Sh.co

Our Mission is to provide high quality. Healthy and affordable drinking water to our customers.

As per the interview made with the Plant Manager of Aman mineral water sh.co the reason to
decide this location is :-

 Geology of the land.

During investigation made at this location the soil at the plant is free chemical. Still this
investigation proves that there is no change on chemically of the soil.

 Labor accessibility
 Temperature (at high temperature water size and quality will decrease, so since
establishment the size and quality of water remain the same.
 Resource(under ground water at 140m)
 Copetatiotor(No related sector industries round area)
Conclusion
To conclude, facility location is the strategically and logical decision about the factory’s
geographical location. As per a variety of factors that affects this decision discussed above in the
methodology and Analysis Aman mineral water factory sh.co make efficient location decision.
This is implied by the sameness of water size and quality factors of temperature since
establishment. Quality of water and price makes Aman mineral water factory sh.co identical.

Recommendations
We as a group recommend

 Aman mineral water Company to promote itself more to be expand another site. The
activities visited in factory was very interesting and highly attractive but people’s
awareness about the factory is very poor even at Operating town,Woliso.
 It is also highly recommended that Aman mineral water company to create its
establishment documents to the customer and any else.
 Sales promotion gives extra incentives for customers to make purchase and one of the
incentives is giving price reduction or discount for customers, in order to induce them to
make purchase. Aman mineral water factory provide discount for retailers but it is not
good enough to attract their interest of making purchase decision but if the company
provide a better discount than it offer currently it will help it to attract new customers
and serve current customers on a better way.
 Business customers of the company do not usually recall the company’s product. But if
the retailers receive a bonus for pushing the company’s brand, it will encourage them to
give priority to sell the company’s product from other competitor product. For this
reason, Aman mineral water factory must offer push money for retailers.

Thank you!
Overview of the location decision process held at Aman used as
checklists
1. name of the institution
2. Location of the institution
3. Area coverage of the institution
4. No of employees(Permanent vs. Contract)(Male vs. Female)
5. Mission, Vision, values and Attributes if any?
6. Year of establishment
7. Production progress
8. The goal behind selecting this location
 Customers
 Workers
 Transportation
 Materials, etc.
9. Objectives of selecting this Location
 Revenue Potential from that Site
 Availability of Resources
 Tax advantages
 Reducing Cost and Production Time
 Convenient Transportation Facilities
 Suitable Environment for Employees
 Meet the Maximum Demands of Customers
 Maximum Space Utilization
10. Essential criteria for selecting the location
 Costs
 Competition
 Hidden Effects
11. Location Decision Process
 Investigation
 Identification
 Evaluation
 Selection
12. The suitable location is determined by analyzing various
factors, parameters and issues
 Product and Industry
 Availability of Resources
 Proximity to Consumers
 Climate Conditions
 Proximity to Market
 Regulatory and Policy Issues
 Labor Supply
 Free Trade Zones
 Infrastructure
 Taxes
13. Three-Tier Model for Assessing Location Competitiveness
 Country Competitiveness
 Sector Competitiveness
 Company Competitiveness
14. Location Planning Techniques
 The Factor Rating Method
 Location Break-Even Analysis
 Weighted Scoring Method
 Center of Gravity Method
 Transportation Method
 Load-distance Method

15. Globalization of Operations