Location Strategy
SESSION 8 (JRU) THE LOCATION STRATEGY
THE STRATEGIC IMPORTANCE OF LOCATION
Location has a major impact on the overall risk and profit of the company. Companies make location decisions relatively infrequently, usually because demand has outgrown the current plant’s capacity or because of changes in labor productivity, exchange rates, costs, or local attitudes. Companies may also relocate their manufacturing or service facilities because of shifts in demographics and customer demands.
Location options include: 1. Expanding an existing facility instead of moving. 2. Maintaining current sites while adding another facility elsewhere, or 3. Closing the existing facility and moving to another location.
The location decision often depends on the type of business. For industrial location decisions, the strategy is usually minimizing costs, although innovation and creativity may also be critical. 1. Location and costs. Because location is such a significant cost driver, location often has the power to make (or break) a company’s strategy. Location decisions based on a low-cost strategy require careful consideration. 2. Location and innovation. When creativity, innovation, and research and development investments are critical to the operations strategy the location criteria may change from a focus on costs. When innovation is the focus, four attributes seem to affect overall competitiveness as well as innovation: a. The presence of high-quality and specialized inputs such as scientific and technical talent. b. An environment that encourages investment and intense local rivalry. c. Pressure and insight gained from a sophisticated local market. d. Local presence of related and supporting industries.
FACTORS THAT AFFECT LOCATION DECISIONS
1. One approach to selecting a country is to identify what the parent organization believes are
THE STRATEGIC IMPORTANCE OF LOCATION
Location has a major impact on the overall risk and profit of the company. Companies make location decisions relatively infrequently, usually because demand has outgrown the current plant’s capacity or because of changes in labor productivity, exchange rates, costs, or local attitudes. Companies may also relocate their manufacturing or service facilities because of shifts in demographics and customer demands.
Location options include: 1. Expanding an existing facility instead of moving. 2. Maintaining current sites while adding another facility elsewhere, or 3. Closing the existing facility and moving to another location.
The location decision often depends on the type of business. For industrial location decisions, the strategy is usually minimizing costs, although innovation and creativity may also be critical. 1. Location and costs. Because location is such a significant cost driver, location often has the power to make (or break) a company’s strategy. Location decisions based on a low-cost strategy require careful consideration. 2. Location and innovation. When creativity, innovation, and research and development investments are critical to the operations strategy the location criteria may change from a focus on costs. When innovation is the focus, four attributes seem to affect overall competitiveness as well as innovation: a. The presence of high-quality and specialized inputs such as scientific and technical talent. b. An environment that encourages investment and intense local rivalry. c. Pressure and insight gained from a sophisticated local market. d. Local presence of related and supporting industries.
FACTORS THAT AFFECT LOCATION DECISIONS
1. One approach to selecting a country is to identify what the parent organization believes are