Location Decisions PDF

CHAPTER 6: LOCATION DECISIONS HPC 4: SUPPLY CHAIN MANAGEMENT IN HOSPITALITY INDUSTRY LOCATION STRATEGIES Location strategy is a plan for finding the most appropriate location for a business to conduct its operations successfully. It involves identifying company needs and objectives, and searching f...

CHAPTER 6: LOCATION DECISIONS HPC 4: SUPPLY CHAIN MANAGEMENT IN HOSPITALITY INDUSTRY LOCATION STRATEGIES Location strategy is a plan for finding the most appropriate location for a business to conduct its operations successfully. It involves identifying company needs and objectives, and searching for locations that are compatible with them.  Location Decision LOCATION STRATEGIES Proximity Access Availabil Regulatory To Cost to ity of Environme Customers Consideratio Supplie Skilled ns nt rs and Labor Partner s Location Decision 6 TYPES OF LOCATION By Dr. Kasra Ferdows Offshor Source Server Contribut Outpost Lead e Factory Factory or Factory Factory Factory Factory Uses involved in product An embedded the firm is a Plant Low-cost network of source of mgmt government development, investment suppliers, innovation involved in incentives production & Labor cost planning, competitors, and supplier and low procurement research facilities competitive selction & exchange decisions, and for materials, advantage of production risk and developing components, and the planning tariff barriers suppliers products organization. 0 0 0 0 0 0 1 2 3 4 5 6 Location Factors Location factors are the considerations that influence where a business, plant, or warehouse should be located. Location Factors REGIONAL TRADE AGREEMENTS (RTA)  FUNCTIONS INCLUDE: 05 AID FOR DEVELOPING 02 04 COUNTRIES FORUM FOR MONITOR TRADE TRADE 01 NEGOTIATION 03 POLICIES 06 S ADMINISTERING AGREEMENTS TRADE INTERNATIONAL DISPUTE ORGANIZATIONS S INTERNATIONAL ORGANIZATIONS MERCOSUR EUROPEAN Among Argentina, Brazil, UNION Paraguay, Uruguay COMMON MARKET OF EASTERN AND Set up after the SOUTHERN AFRICA WWII, the EU consists of 27 ASSOCIATION OF members. SOUTHEAST ASIAN NATIONS In Southeast Asia (1967) NORTH AMERICAN FREE Among the US, Canada, TRADE AGREEMENT and Mexico  COMPETITIVENESS OF NATIONS 0 1 79 CRITERIA 72 CRITERIA ECONOMIC 0 GOVERNMENT PERFORMANCE 2 EFFICIENCY 0 101 71 CRITERIA CRITERIA 4 BUSINESS INFRASTRACTURE EFFICIENCY 0 3 2006-07 WORLD COMPETITIVENESS RANKINGS RANK GLOBAL COMPETITIVENESS WORLD COMPETITIVENESS REPORT (WEF) YEARBOOK (IMD) 1 SWITZERLAND US 2 FINLAND SINGAPORE 3 SWEDEN HONG KONG 4 DENMARK LUXEMBURG 5 SINGAPORE DENMARK 6 US SITZERLAND 7 JAPAN ICELAND 8 GERMANY NETHERLANDS 9 NETHERLANDS SWEDEN 10 UK CANADA 12 PILLARS OF COMPETITIVENESS MACROECONOM HEALTH & INSTITUTIO INFRASTRUCTURE IC STABILITY PRIMARY NS EDUCATION HIGHER GOODS LABOR MARKET FINANCIAL EDUCATION & MARKET EFFICIENCY MARKET TRAINING EFFICIENC SOPHISTICATION Y  12 PILLARS OF TECHNOLOGICAL 09 READINESS COMPETITIVENESS 10 MARKET SIZE 11 BUSINESS SOPHISTICATION 12 INNOVATION Government Taxes and Incentives Several levels of government must be considered when evaluating potential locations. 3 LEVELS OF GOVERNMENT - LOCAL, refers to the administrative authority responsible for governing a specific geographical area, such as a city, town, municipality, or county. - REGIONAL OR STATE, are administrative bodies that have authority over specific geographic areas larger than individual municipalities but smaller than the national government. - NATIONAL OR FEDERAL, also known as the federal government, is the central governing authority within a sovereign state or country. It is the highest level of government and is responsible for overseeing and managing the entire nation. Government Taxes and Incentives Countries with high tariffs discourage importing goods into the country. Tariffs have three primary functions: - to serve as a source of revenue - to protect domestic industries - to remedy trade distortions (punitive function) High tariffs encourage multinational corporations to produce locally. Many countries have foreign trade zones (FTZs) where materials are imported duty-free as inputs to production Currency Stability Impacts business costs & consequently location decisions. - This emphasizes the interconnectedness of factors influencing business costs and how these costs play a pivotal role in determining the location decisions of a business. Environmental Issues  Trade liberalization creates need for environmental cooperation  NAAEC – North American Agreement on Environmental Cooperation  Coordination on environmental issues will mitigate  Greenhouse gas production & Ozone depletion  Production of Nitrogen & Sulfur Dioxide  Deforestation  MARS MERCURY Supply Access & Proximity to Markets Chain NEPTUNE are two important factors Infographic that businesses consider when making location decisions. 1. Access to market refers to a business's ability to reach its target customers. 2. Proximity to markets refers to the physical distance between a business and its target customers. Relocation to China not just for cheap labor but for access to the market. In the service industry, proximity to customers is even more critical. Convenience is a factor in consumer choice. Labor Issues are a broad term that encompasses a wide range of concerns related to the employment relationship. 01 03 Wage rates; Labor turnover rates; availability, labor force productivity, & 02 competitors 04 skill Unemployment Right-to-work & laws underemployme nt rates  MARS MERCURY Supply Chain NEPTUNE Infographic Access to Suppliers & Cost Access to Suppliers refers to the ability of a company to find and source the goods and services it needs from qualified suppliers. Supplier proximity influences the delivery of materials & effectiveness of the supply chain.  Supply Chain Utility Availability & Cost Infographic Supply of electricity has not kept pace with the high speed of development In heavy industries the availability & cost of energy are critical considerations. Quality-of-Life Issues Education Economy Natural Environment Social Environment Culture/recreation Healthcare Government/politics Mobility Public Safety Land Availability & Costs As land & construction costs in big cities continue to escalate, the trend is to locate in the suburbs & rural areas Break even Model Identify the locations to be considered. Determine the fixed cost of land, property taxes, insurance, equipment, & buildings. Determine the unit variable cost, materials, utilities, & transportation costs. Construct the total cost lines. Determine the break-even points on the graph. Identify the range over which each location has the lower cost Helpful Online information for Location Analysis Was developed by the www.develop International Economic mentalliance.c Development Council Website om and Conway Data, Inc. providing useful information for www.mapp Was developed to aid in use in location inganalytic site selection for a wide analysis: s.com array of businesses. Helpful Online information for Location Analysis Was developed by the www.develop International Economic mentalliance.c Development Council Website om and Conway Data, Inc. providing useful information for use in location analysis: Helpful Online information for Location Analysis Website providing useful information for use in location www.mapp analysis: Was developed to aid in inganalytic site selection for a wide s.com array of businesses.  Business Clusters 02 Research parks & special fierce economic/industrial competition 01 zones serve as 03 Reasons for among rival Geographic magnets for companies success- companies concentrations business clusters. close recruit from of cooperation, local skilled interconnected companies and coordination, & workers institutions. trust among clustered companies  Sustainable Development “development that meets the Sustainabl needs of the present without e compromising the ability of future Developme generations to meet their own nt needs”  Sustainable Development GREEN DEVELOPMENT “prioritizes what its proponents consider to be environmental sustainability over economic and cultural considerations” ▪ Resource ranking and technology innovation are keys to reducing cost and increasing competitiveness ▪ United Nations Framework Convention on Climate Change (UNFCCC) THAT’S ALL TNX