Belarmino, Maria Djanella B.

BSA-4

1. List some of the reasons organization need to make location decision.

Your business's location is key to successful operations and overall growth. When
choosing your location, consider company needs, customers, employees and equipment
needed to complete the services.
Operations and Equipment
Businesses must have ample space for the equipment required to produce their
products and services. If you have a manufacturing company, you will require
extensive space for equipment and inventory. Consider your business's products
and services when establishing your location.

Customer Convenience

If your business draws customers to a store location, the site must be convenient
to the customer. The location must be easily accessible and provide the customer
with a feeling of safety upon their arrival and exit.

Competition
A business's location can affect the competition it faces from businesses that sell
similar products and services.

Service and Sales

Your business's service and sales opportunities are greatly affected by your
location. Your selected location should center on your target customers and
should generate walk-in traffic.

Operating Expenses
The location of a business can influence the total cost of operation. Renting a
storefront on a popular street or in a highly trafficked mall is likely to be more
expensive than opening a store in a small commercial district in a residential area.
A business could be better off opening its doors in an area that is cheap, even if it
results in fewer total sales.
 Taxes and Regulations
The location of a business determines the state and local taxes that owners have to
pay and the regulations they must follow. Income tax and sales tax rates vary
from one area to another, which can have a significant impact on a business
owner's earnings.

The impact of location depends on the type of business. For example, it is

important for shops and restaurants to be conveniently located for customers. A
delivery-only takeaway may prefer to locate in inexpensive premises on the edge
of town close to good transport links.

2. Identify critical success factors for location decision in terms of:

a. Site-related factor

Site size and cost

Air, rail, highway, and waterway systems

Zoning restrictions

Nearness of services/ supplies needed

Environmental impact issues

b. Multiple plant strategies

Business Area: Presence of other similar manufacturing units around makes

business area conducive for facility establishment.

Location of markets

Availability of Skill Labor: Education, experience and skill of available

labor are another important, which determines facility location.

c. Community
 Community and site. Community and site evaluation involves examining
whether a company and a prospective community and site will be compatible
in the long-term.
Environmental regulation. Companies should consider the
various environmental regulations that might affect their operations in
different locations. Environmental regulation also may have an impact on the
relationship between a company and the community around a prvospective
location.

d. Regional Factor

Cultural and economic issues

Availability of supplies, communications, energy

e. International location factor

Exchange rates and currency risks

Political risks, government rules, attitudes, incentives

Free Trade Zone/Agreement: Free-trade zones promote the establishment of

manufacturing facility by providing incentives in custom duties and levies. On
another hand free trade agreement is among countries providing an incentive to
establish business, in particular, country

3. Discuss and give example for the following techniques used in Location Decision Strategy :

a. Break Even cost analysis

Method of cost-volume analysis used for industrial locations

Three steps in the method :

Determine fixed and variable costs for each location

Plot the cost for each location

Select location with lowest total cost for expected production volume
 Example:

b. Transportation Model
 The transportation model uses the principle of 'transplanting' something,
like taking a hole from one place and inserting it in another without change. First
it assumes that to disturb or change the idea being transported in any way will
damage and reduce it somehow. It also assumes that it is possible to take an idea
from one person's mind into another person's so that the two people will then
understand in exactly the same way.
The transportation model is a valuable tool in analyzing and modifying existing
transportation systems or the implementation of new ones. In addition, the model
is effective in determining resource allocation in existing business structures.

c. Factor Rating

Popular because a wide variety of factors can be included in the analysis

Six steps in the method

 Develop a list of relevant factors called critical success factors

Assign a weight to each factor

Develop a scale for each factor

Score each location for each factor

Multiply score by weights for each factor for each location

Recommend the location with the highest point score

d. Center of Gravity Model

Finds location of distribution center that minimizes distribution costs

Considers: Location of markets , Volume of goods shipped to those markets , Shipping

cost (or distance)
e. Global Information System

New tool to help in location analysis

Enables more complex demographic analysis

Available data bases include

1. Detailed census data

2. Detailed maps

3. Utilities

4. Geographic features

5. Locations of major services