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Chapter 8

Chapter 8 BU385.docx

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Paul Iyogun

BU385 Chapter 8Location Planning and Analysis Week 11 Introduction Location decisions are important for the following reasonsThey entail a longterm commitment that makes mistakes difficult to overcome Location decisions impact investment requirements operating costs and revenues A poor choice of location might result in a shortage of qualified labour inadequate supplies ofraw materials or some similar condition that is detrimental to operationsNo single location may be better than the othersLocation factors can depend on where a business is in the supply chain Location Decision Process The way an organization approaches location decisions often depends on its size and the nature and scope of its operationsLarge established companies tend to take a more formal approach to location Basic steps to a successful location decision1 Identify important search parameters and factors such as location of markets or rawmaterials 2 Gather information on appropriate sites 3 Eliminate some to obtain a short list of three or four sites 4 Visit the shortlisted sites meeting with local authorities and real estate agents 5 Evaluate the alternatives and makes a selectionThe process will typically take six months to a year Factors that Affect Location Decisions Often one or two factors dominate the decision RegionalCountry FactorsLocation of Raw Materials Companies locate near or at the source of their raw materials for three primary reasons necessity perishability and transportation costsMining and fishing fall under necessityDairy and meat products consider perishabilityTransportation costs are important in industries where processing eliminates much of the bulk in a raw material making it much less expensive to transport after processing Location of Markets Retailers and service providers are usually found near the centre of the markets they serveBusinesses tend to seek locations with high population densities or trafficSome companies must locate close to their markets because of the perishability of their productsEx Bakeries flower shopsLocation of many government services should be near the centre of the markets they are designed to serveLabour Factors Primary labour considerations are availability of workers the wage rates and productivity and whether unions are a potential problem Other Factors Electric power sometimes plays a role in location decisions
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