L o c a tio n S tr a te g ie s L o c a tio n S tr a te g ie s
P e rt e m u a n k e -4
P o k o k B a h a s a n
M a h a sis w a m e m a h a m i p e n tin gn ya p e m ili h a n lo k a si p a b rik d a n d is tr ib u si p e m ili h a n lo k a si p a b rik d a n d is tr ib u si p a b rik s e b a ga i s a la h s a tu f a k to r p e n tin gn ya u n tu k m e m e n a n gk a n p e rs a in ga n
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S u b B a h a s a n d a n S a s a ra n B e la ja r
P e n e n tu a n lo k a si p a b rik M a h a sis w a m e m a h a m i p e m ili h a n lo k a si p a b rik ya n g te p a t s e b a ga i s a la h s a tu fa k to r ya n g te p a t s e b a ga i s a la h s a tu fa k to r p e rs a in ga n
K rit e ria d a la m p e m ili h a n lo k a si p a b rik M a h a sis w a m e m a h a m i b e rb a ga i k rit e ria p e n tin g d a la m p e m ili h a n lo k a si p a b rik
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p e n tin g d a la m p e m ili h a n lo k a si p a b rik
L o c a tio n S tr a te g y
O n e o f t h e m o st im p o rt a n t d e ci sio n s a fir m m a k e s fir m m a k e s In cr e a sin gl y gl o b a l i n n a tu re L o n g te rm im p a ct a n d d e ci sio n s a re d if fic u lt t o c h a n ge T h e o b je ct iv e is t o m a xi m iz e t h e
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T h e o b je ct iv e is t o m a xi m iz e t h e b e n e fit o f l o ca tio n t o t h e f ir m
L o c a tio n a n d In n o v a tio n
C o st is n o t a lw a ys t h e m o st im p o rt a n t a sp e ct o f a s tr a te gi c d e ci sio n F o u r k e y a tt rib u te s w h e n s tr a te gy is b a se d o n F o u r k e y a tt rib u te s w h e n s tr a te gy is b a se d o n in n o va tio n
High-quality and specialized inputsAn environment that encourages investment andlocal rivalryA sophisticated local market6 Prentice Hall, Inc. A sophisticated local marketLocal presence of related and supporting industries
L o c a tio n D e c is io n s
L o n g- te rm d e ci sio n s D e ci sio n s m a d e in fr e q u e n tly D e ci sio n s m a d e in fr e q u e n tly D e ci sio n g re a tly a ff e ct s b o th f ix e d a n d v a ria b le c o st s O n ce c o m m it te d t o a lo ca tio n , m a n y re so u rc e a n d c o st is su e s a re d if fic u lt
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re so u rc e a n d c o st is su e s a re d if fic u lt to c h a n ge
L o c a tio n D e c is io n s
C o u n tr y D e ci si o n C rit ic a l S u cc e ss F a ct o rs
1.Political risks, government 1.Political risks, government rules, attitudes, incentives2.Cultural and economic issues3.Location of markets4.Labor availability, attitudes,productivity, costs
2006 Prentice Hall, Inc. 7 5.Availability of supplies,communications, energy6.Exchange rates and currencyrisks
L o c a tio n D e c is io n s
R e gi o n / C o m m u n it y D e ci si o n C rit ic a l S u cc e ss F a ct o rs
1.Corporate desires
D e ci si o n
2.Attractiveness of region3.Labor availability, costs, attitudes towards unions4.Costs and availability of utilities5.Environmental regulations6.Government incentives and fiscal MNWI
MI
2006 Prentice Hall, Inc. 8 6.Government incentives and fiscal policies7.Proximity to raw materials andcustomers8.Land/construction costs ILIN OH
L o c a tio n D e c is io n s
Si te D e ci si o n C rit ic a l S u cc e ss F a ct o rs
1.Site size and cost2.Air, rail, highway, andwaterway systems3.Zoning restrictions4.Nearness of services/supplies needed
6 Prentice Hall, Inc. supplies needed5.Environmental impactissues
F a ct o rs T h a t A ff e ct L o ca tio n D e ci sio n s
L a b o r p ro d u ct iv it y
Wage rates are not the only costWage rates are not the only costLower productivity may increase total costLabor cost per dayProductivity (units per day) = cost per unit ConnecticutJuarez
$25
6 Prentice Hall, Inc. = $1.17 per unit $7060 units = $1.25 per unit $2520 units
F a ct o rs T h a t A ff e ct L o ca tio n D e ci sio n s
E x ch a n ge r a te s a n d c u rr e n cy r is k s
Can have a significant impact on coststructure Can have a significant impact on coststructureRates change over timeC o st s
Tangible -easily measured costs such as utilities, labor, materials, taxes2006 Prentice Hall, Inc. 11 Intangible -less easy to quantify andinclude education, public transportation, community, quality-of-life
F a c to rs T h a t A ff e c t L o c a tio n D e c is io n s
A tt it u d e s N a tio n a l, s ta te , l o ca l go ve rn m e n ts N a tio n a l, s ta te , l o ca l go ve rn m e n ts to w a rd p riv a te a n d in te lle ct u a l p ro p e rt y, z o n in g, p o llu tio n , e m p lo ym e n t s ta b ili ty W o rk e r a tt it u d e s t o w a rd s t u rn o ve r, u n io n s, a b se n te e is m
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G lo b a lly c u lt u re s h a ve d iffe re n t a tt it u d e s t o w a rd s p u n ct u a lit y, le ga l, a n d e th ic a l i ss u e s
F a c to rs T h a t A ff e c t L o c a tio n D e c is io n s
P ro xi m it y to m a rk e ts V e ry im p o rt a n t t o s e rv ic e s V e ry im p o rt a n t t o s e rv ic e s JI T s ys te m s o r h igh t ra n sp o rt a tio n co st s m a y m a k e it im p o rt a n t t o m a n u fa ct u re rs P ro xi m it y to s u p p lie rs P e ris h a b le go o d s, h igh t ra n sp o rt a tio n
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P e ris h a b le go o d s, h igh t ra n sp o rt a tio n co st s, b u lk y p ro d u ct s
F a c to rs T h a t A ff e c t L o c a tio n D e c is io n s
P ro xi m it y to c o m p e tit o rs C a lle d c lu st e rin g C a lle d c lu st e rin g O ft e n d riv e n b y re so u rc e s s u ch a s n a tu ra l, in fo rm a tio n , c a p it a l, t a le n t F o u n d in b o th m a n u fa ct u rin g a n d se rv ic e in d u st rie s
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F a ct o r- R a tin g M e th o d
P o p u la r b e ca u se a w id e v a rie ty o f f a ct o rs c a n b e in cl u d e d in t h e a n a ly sis Si x st e p s i n t h e m e th o d Si x st e p s i n t h e m e th o d
1.Develop a list of relevant factors called critical success factors2.Assign a weight to each factor3.Develop a scale for each factor4.Score each location for each factor2006 Prentice Hall, Inc. 15 4.Score each location for each factor5.Multiply score by weights for each factor for eachlocation6.Recommend the location with the highest point score
F a c to r- R a tin g E x a m p le
CriticalScoresSuccess(out of 100)Weighted ScoresFactorWeightFranceDenmarkFranceDenmark
Labor Labor availabilityand attitude.257060(.25)(70) = 17.5(.25)(60) = 15.0People-tocar ratio.055060(.05)(50) = 2.5(.05)(60) = 3.0Per capitaincome.108580(.10)(85) = 8.5(.10)(80) = 8.0Tax structure.397570(.39)(75) = 29.3(.39)(70) = 27.3Education
2006 Prentice Hall, Inc. 16 Educationand health.216070(.21)(60) = 12.6(.21)(70) = 14.7Totals1.0070.468.0
L o ca tio n a l B re a k -E v e n A n a ly sis
M e th o d o f c o st -v o lu m e a n a ly sis u se d fo r i n d u st ria l l o ca tio n s fo r i n d u st ria l l o ca tio n s T h re e s te p s in t h e m e th o d
1 . D e te rm in e fi xe d a n d v a ria b le c o st s fo r e a ch lo ca tio n
2 . P lo t t h e c o st fo r e a ch lo ca tio n
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3 . Se le ct lo ca tio n w it h lo w e st t o ta l c o st fo r e xp e ct e d p ro d u ct io n v o lu m e
L o ca tio n a l B re a k -E v e n A n a ly sis E x a m p le
Three locations:
FixedVariableTotalCityCostCostCostAkron$30,000$75$180,000Bowling Green$60,000$45$150,000Chicago$110,000$25$160,000Selling price = $120Expected volume = 2,000 units CityCostCostCost
6 Prentice Hall, Inc. Expected volume = 2,000 units
Total Cost = Fixed Cost + Variable Cost x Volume
L o c a tio n a l B re a k -E v e n A n a ly s is E x a m p le
–$180,000 ––$160,000 –$150,000 –$150,000 ––$130,000 ––$110,000 –––$80,000 ––$60,000 –––
Annual cost
2006 Prentice Hall, Inc. 19 –$30,000 ––$10,000 –– |||||||05001,0001,5002,0002,5003,000Volume Akronlowestcost Bowling Greenlowest cost Chicagolowest cost
Figure 8.2
C e n te r- o f- G ra v it y M e th o d
F in d s l o ca tio n o f d is tr ib u tio n ce n te r t h a t m in im iz e s ce n te r t h a t m in im iz e s d is tr ib u tio n c o st s C o n sid e rs L o ca tio n o f m a rk e ts V o lu m e o f g o o d s sh ip p e d t o t h o se
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V o lu m e o f g o o d s sh ip p e d t o t h o se m a rk e ts Sh ip p in g co st ( o r d is ta n ce )
C e n te r- o f- G ra v it y M e th o d
P la c e e x is tin g lo c a tio n s o n a c o o rd in a te g rid G rid o rig in a n d s c a le is a rb itr a ry
M a in ta in r e la tiv e d is ta n c e s C a lc u la te X a n d Y c o o rd in a te s fo r ‘c e n te r o f g ra v ity ’
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A s s u m e s c o s t i s d ire c tly p ro p o rti o n a l to d is ta n c e a n d v o lu m e s h ip p e d
C e n te r- o f- G ra v it y M e th o d
x - co o rd in a te = ∑ d
ixQ
i∑ Q
i iii
∑ d
iyQ
i∑ Q
i ii
y - co o rd in a te =
whered=x-coordinate of location i
6 Prentice Hall, Inc. wheredix =x-coordinate of location idiy =y-coordinate of location iQi =Quantity of goods moved toor from location i
C e n te r- o f- G ra v it y M e th o d
North-South
120 – Chicago (30, 120) New York (130, 130)
120 –
90 –
60 –
30 – Pittsburgh (90, 110)
Atlanta (60, 40)
2006 Prentice Hall, Inc. 23 East-West –||||||306090120150Arbitraryorigin Atlanta (60, 40)
C e n te r- o f- G ra v it y M e th o d
Number of ContainersStore LocationShipped per MonthChicago (30, 120)2,000Chicago (30, 120)2,000Pittsburgh (90, 110)1,000New York (130, 130)1,000Atlanta (60, 40)2,000
x-coordinate = (30)(2000) + (90)(1000) + (130)(1000) + (60)(2000)2000 + 1000 + 1000 + 2000= 66.7
2006 Prentice Hall, Inc. 24 = 66.7
y-coordinate = (120)(2000) + (110)(1000) + (130)(1000) + (40)(2000)2000 + 1000 + 1000 + 2000= 93.3
C e n te r- o f- G ra v it y M e th o d
North-South
120 – Chicago (30, 120) New York (130, 130)
120 –
90 –
60 –
30 – Pittsburgh (90, 110)
Atlanta (60, 40) Center of gravity (66.7, 93.3)
+
6 Prentice Hall, Inc. East-West –||||||306090120150Arbitraryorigin Atlanta (60, 40)
T ra n s p o rt a tio n M o d e l
F in d s a m o u n t to b e s h ip p e d f ro m se ve ra l p o in ts o f s u p p ly t o s e ve ra l p o in ts o f d e m a n d se ve ra l p o in ts o f s u p p ly t o s e ve ra l p o in ts o f d e m a n d So lu tio n w ill m in im iz e t o ta l p ro d u ct io n a n d s h ip p in g co st s A s p e ci a l c la ss o f l in e a r p ro gr a m m in g p ro b le m s
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p ro b le m s
W o rl d w id e D is tr ib u tio n o f V o lk s w a g e n s a n d P a rt s
2006 Prentice Hall, Inc. 27 Figure 8.4
S e rv ic e L o c a tio n S tr a te g y
1. Purchasing power of customer-drawing area
2. Service and image compatibility with demographics of the customer-drawing areathe customer-drawing area
3. Competition in the area
4. Quality of the competition
5. Uniqueness of the firm’s and competitors’ locations
6. Physical qualities of facilities and neighboringbusinesses
2006 Prentice Hall, Inc. 28 businesses
7. Operating policies of the firm
8. Quality of management
L o c a tio n S tr a te g ie s
Service/Retail/Professional LocationGoods-Producing LocationRevenue FocusCost FocusVolume/revenueTangible costsVolume/revenueDrawing area; purchasing powerCompetition; advertising/pricing
Physical qualityParking/access; security/lighting;appearance/image
Cost determinants Tangible costsTransportation cost of rawmaterialShipment cost of finished goodsEnergy and utility cost; labor;raw material; taxes, and so on
Intangible and future costsAttitude toward union
6 Prentice Hall, Inc. Cost determinantsRentManagement caliberOperations policies (hours, wagerates) Attitude toward unionQuality of lifeEducation expenditures by stateQuality of state and local government
L o c a tio n S tr a te g ie s
Service/Retail/Professional LocationGoods-Producing LocationTechniquesTechniquesRegression models to determineTransportation methodsRegression models to determineimportance of various factorsFactor-rating methodTraffic countsDemographic analysis of drawing areaPurchasing power analysis of areaCenter-of-gravity methodGeographic information systems Transportation methodsFactor-rating methodLocational break-even analysisCrossover charts
6 Prentice Hall, Inc. Geographic information systems
L o c a tio n S tr a te g ie s
Service/Retail/Professional LocationGoods-Producing LocationAssumptionsAssumptionsLocation is a major determinant Location is a major determinant Location is a major determinant of revenueHigh customer-contact issues arecriticalCosts are relatively constant for agiven area; therefore, therevenue function is critical Location is a major determinant of costMost major costs can be identifiedexplicitly for each siteLow customer contact allows focus on the identifiable costsIntangible costs can be evaluated
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G e o g ra p h ic In fo rm a tio n S y s te m s (G IS )
N e w t o o l t o h e lp in lo ca tio n a n a ly sis E n a b le s m o re c o m p le x d e m o gr a p h ic a n a ly sis E n a b le s m o re c o m p le x d e m o gr a p h ic a n a ly sis A va ila b le d a ta b a se s in cl u d e
Detailed census dataDetailed mapsUtilities2006 Prentice Hall, Inc. 32 UtilitiesGeographic featuresLocations of major services
