McGraw-Hill/Irwin Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. 8 Location Planning and Analysis

8-2 Learning Objectives  List some of the main reasons organizations need to make location decisions.  Explain why location decisions are important.  Discuss the options that are available for location decisions.  Describe some of the major factors that affect location decisions.  Outline the decision process for making these kinds of decisions.  Use the techniques presented to solve typical problems.

8-3 Need for Location Decisions  Marketing Strategy  Cost of Doing Business  Growth  Depletion of Resources

8-4 Nature of Location Decisions  Strategic Importance of location decisions  Long term commitment/costs  Impact on investments, revenues, and operations  Supply chains  Objectives of location decisions  Profit potential  No single location may be better than others  Identify several locations from which to choose  Location Options  Expand existing facilities  Add new facilities  Move

8-5 Location Decision Factors Regional Factors Site-related Factors Multiple Plant Strategies Community Considerations

8-6  Location of raw materials  Location of markets  Labor factors  Climate and taxes Regional Factors

8-7  Quality of life  Services  Attitudes  Taxes  Environmental regulations  Utilities  Developer support Community Considerations

8-8  Land  Transportation  Environmental  Legal Site Related Factors

8-9 Service and Retail Locations  Manufacturers – cost focused  Service and retail – revenue focused  Traffic volume and convenience most important  Demographics  Age  Income  Education  Location, location, location  Good transportation  Customer safety

8-10 Competitive Clustering  Customers like to make comparisons and seek out locations where many dealers are concentrated  What are examples?

8-11 Saturation Marketing  In densely populated areas a company may have many sites, which results in a stronger barrier to outside competition and multiple use of advertising.  Examples?

8-12 Marketing Intermediaries  A service may be extended beyond geographic boundaries.  Example: Bank of America Credit Card  Example: Group insurance written through employers and credit unions

8-13 Substitution of Communication for Travel  Changes the playing field for services  Examples:  McDonald’s separation of order taking from the store  Satellite support services (insurance underwriting)

8-14 Impact of Internet  What are the key enabling technologies for electronic commerce? (Think Amazon, Barnes and Noble, Ebay)

8-15 Separation of Front from Back Office  Front and back office services often do not need to be co-located.  Can electronic media substitute?  What about self-service kiosks or internet sites?  How will communication be accomplished?  Can employees work from home?  Can this task be accomplished offshore?

8-16 Comparison of Service and Manufacturing Considerations Manufacturing/DistributionService/Retail Cost FocusRevenue focus Transportation modes/costsDemographics: age,income,etc Energy availability, costsPopulation/drawing area Labor cost/availability/skillsCompetition Building/leasing costsTraffic volume/patterns Customer access/parking Table 8.2

8-17 Trends in Locations  Foreign producers locating in U.S.  “Made in USA”  Currency fluctuations  Just-in-time manufacturing techniques  Microfactories  Information Technology

8-18 Global Locations  Reasons for globalization  Benefits  Disadvantages  Risks  Global operations issues

8-19 Globalization  Facilitating Factors  Trade agreements  Technology  Benefits  Markets  Cost savings  Legal and regulatory  Financial

8-20 Globalization  Disadvantages  Transportation costs  Security  Unskilled labor  Import restrictions  Criticisms  Risks  Political  Terrorism  Legal  Cultural