Location AND PLANNING ANALYSIS

1. By Freneil I. Reyes PornpimolSupanimittrakul LocationAND PLANNING ANALYSIS

2. LOCATION AND PLANNING ANALYSIS • Nature of Location Decisions • General Procedure for Location Decisions • Factors Affecting Location Decision • Service and retail locations • Evaluating location alternatives

3. Location and Planning Analysis • Nature of Location Decisions • Strategic Importance • Objectives • Location Options • General Procedure for Location Decisions

4. A. Nature of Location Decisions Strategic Importance • Organization’s strategies • Long term Commitment • Investment • Competitive Advantage • Supply Chains

5. Strategic Importance • Organization’s Strategies - a location for the convenience of the Producer, where costumers are abundant. ex. 1. strategy of being a low – cost producer might result in locating where labor or material costs are low, or locating near markets or raw materials to reduce transportation costs. 2. a strategy of increasing market share might result in locating in high traffic areas. 3. a strategy for the convenience of the costumers.

6. Strategic Importance 2. Long Term Commitment - the location should be maximize in long period of time. ex. A business establishment that frequently moves from one place to another does not add an extra profit to businessman.

7. Strategic Importance 3. Investment - operating costs and revenues and operations should be justified by the location ex. poor choice of location might result in excessive transportation cost, a shortage of qualified labor, loss of competitive advantage, inadequate supplies of raw materials etc.

8. Strategic Importance • Competitive Advantage - the business should be able to compete in the business world specially on that specific location.

9. Strategic Importance 5. Supply Chains - the supply of products and raw materials should be able to reach the location in the desired time without delay of delivery.

10. Objectives • No single location is better than the others. • There are numerous acceptable locations to choose.

11. Objectives “Location criteria can depend on where a business is in the supply chain.” Ex. business involved in storing and distributing goods often choose a central location to minimize distribution cost.

12. Location Options

13. Location Options • Expand existing facility • Adequate room for expansion. • Expansion costs are often less than those of other alternatives. • Add new locations while retaining existing ones • Impact on total system. • Defensive strategy. • Prevent competitors. Opening a new store in a shopping mall may simply draw customers who already patronize an existing store in the same chain, rather than expand the market.

14. Location Options • Shut down at one location and move to another • Weigh the costs of a move and the resulting benefits against the benefits of remaining in an existing location. • Shift in markets. • Doing nothing • To maintain the status quo.

15. B. General Procedure for Making Location Decisions • The general procedure for making location usually consist of the following steps: • 1. Decide on the criteria to use for evaluating location alternatives, such as increased revenues or community service. • 2. Identify important factors, such as location of markets or raw materials.

16. B. General Procedure for Making Location Decisions • 3. Develop location alternatives: • a. Identify the general region for a location. • b. Identify a small number of community alternatives. • c. Identify site alternatives among the community alternatives • 4. Evaluate the alternatives and make a selection. Step (1) is simply a matter of managerial preference. Steps (2) through (4) may need some elaboration.

17. C. Factors that Affect Location Decisions. • Once an organization has determined the most important factors, it will try to narrow the search for suitable alternatives to one geographic region.

18. Regional factors 1.Location of Raw Materials three primary reasons; a. necessity (Ex: farming, forestry, and fishing) b. perishability (Ex: canning, freezing of fresh fruit and vegetables processing of dairy products, baking, and so on. c. transportation costs (Ex: aluminum reduction, cheese making, and paper production. 2.Location of markets Profit-oriented -> near the markets Nonprofit organizations -> needs of the users of their services

19. Regional factors 3. Labor Factors - cost and availability of labor, - wage rates in an area - labor productivity and attitudes toward work, - whether unions are a serious potential problem. 4. Climate and Taxes many companies have been attracted to some Sun Belt states by ample supplies of low-cost energy of labor, the climate, and tax considerations.

20. Community Considerations • Communities do not, as a rule, want firms that will create pollution problems or otherwise lessen the quality of life in the community.

21. Site-Related Factor • Land, transportation, and zoning or other restrictions. • Because of the long-term commitment usually required, land costs may be secondary to other site-related factors, such as room for future expansion, current utility and sewer capacities • -and any limitations on these that could hinder future growth • —and sufficient parking space for employees and customers. In addition, for many firms access roads for trucks or rail spurs are important.

22. Multiple Plant Manufacturing Strategies • Product Plant Strategy: entire products or product lines are produced in separate plants, and each plant usually supplies the entire domestic market “decentralized” • Market Area Plant Strategy: plants are designed to serve a particular geographic segment of a market (e.g., the West Coast, the Northeast). “Centralized coordination.”

23. Multiple Plant Manufacturing Strategies • Process Plant Strategy: different plants concentrate on different aspects of a process. “a highly informed, centralized administration”

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