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Operations Management ­ Text Book
One of the first issues facing a new business will be where to locate it operations. This
can involve high levels of investment and have a major impact on competitiveness. These
decisions may involve several different elements; first which country, then which region

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Political Stability.
The political climate can have an impact on the appeal of certain areas.
A firm may locate in a particular area because of the resources it offers.
A perfume company for example may benefit from being based in Paris of Milan
but may not gain the…

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highest average rate of return and the highest net present value. In reality the
decision may not be that straightforward ­ e.g. one option may have a quicker
payback but a lower average rate of return.

Qualitative Factors
Although firms are likely to examine the potential impact on revenues and…

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There are costs of notifying customers and suppliers and administrative costs
such as changing the firm's literature to include the new address.

A new location may also be part of an expansion process: a firm could be building new
production facilities or opening a new outlet, for example. The acquisition…

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be influenced by qualitative factors ­ they may prefer to move to a location where they
are familiar with the culture or language, fore example. Second they must consider the
possible impact on quality. A cheaper location may not have the same access to
high-quality resources. Third a firm's location…

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Operations Management ­ Class Notes
Location decisions

Circumstances When Location Decisions have to be made
A New business
Existing businesses may wish to expand
A cost cutting motive
New market developments e.g. Multi-regional

Location Decisions may Influence:
Costs ­ Gearing, Fixed and Variable costs, Break even output
Sales ­ Market…

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Why Become Multinational?
Benefit from lower costs overseas
Less regulation e.g. fewer health and safety laws
A greater pool of labour (cheaper & more flexible)
Benefit from market opportunities overseas
Close to overseas customers ­ cheaper transport costs
Overcome protectionist trade barriers e.g. very difficult to trade in China unless…


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