Chapter 14: Operational Strategies: Location

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  • Operational Strategies: Location
    • Main factors influencing business location
      • technology
        • allowed businesses to be more flexible
        • can operate from a much wider choice of locations
      • costs of factors of prosuction
        • main costs are land costs, transport costs, labour costs
        • most businesses aim to locate at least-cost site
      • infrastructure
        • will look at quality of new location compared to existing
        • network of utilities such as transport links, health and education facilities, telecommunication systems
      • qualitative factors
        • may wish to be located near good local facilities
        • may wish to locate close to owners home
    • Factors influencing location decisions involving expansion / relocation
      • resources
        • crucial influence on primary sector businesses
        • weight-gaining industries tend to locate close to their market
        • weight-losing industries tend to locate close to their raw materials
      • the market
        • save transport costs if located close to their market
      • government interention
        • may provide assistance in some areas in the form of grants
        • member countries of the EU must regulate their regional policy within the guidelines set by the European Commission
    • Industrial Inertia
      • another factor that can influence location
      • once established, firms may be reluctant to relocate
      • may be due to benefits from external economies of scale
        • labour supply with skills needed by firms in that industry
        • specialist training facilities in the region
        • suppliers and customers based locally
        • infrastructure that is geared towards the needs of the industry
    • Issues relating to international locations
      • global markets
      • cost reduction
      • avoidance of trade barriers
    • Benefits of optimal location
      • improving competitiveness
      • providing a USP
      • increasing flexibility
      • increasing access to customers
    • Multi-site locations
      • Advantages
        • lower costs
        • improved market focus
        • avoidance of trade barriers
        • increased flexibility
        • overcoming cultural difficulties
        • regional specialisation
      • Disadvantages
        • cultural differences
        • loss of control
        • increased risk
        • increased unit costs
        • globalisation
    • Methods of making location decisions
      • location decisions using qualitative factors
      • location decisions from investment appraisal
    • Other factors affecting relocation
      • loss of skills developed in existing workforce
      • lower morale and productivity before relocation
      • cost of relocation
      • finding new suppliers and customers
      • break-up of working groups
      • redundancy payments

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