5.4 - Location Flashcards
What 10 factors have to be taken into consideration when deciding to locate or relocate a business
Costs, Competition, Type of land, Markets, Familiarity with the area, Labour Pool, Infrastructure, Suppliers, Government and National, Regional and International factors.
Why are costs important
a key factor that will arise from the cost of : Land, Labour and Transport.
Why is competition important
Location of Competition is key to locate or relocate a business. There is a balance between a “gap” in the market and be near competitors. The Concept of Cannibalistic Marketing lies in this category.
What is cannibalistic marketing
the practice of slashing the price of a product or introducing a new product into a market of established product categories (i.e. Mc Donald’s) .
Why is the type of land important
different types of land are suited for different business (i.e. ski resorts)
Why are markets important
a place where most products are traded. This of course changed with the introduction of e-commerce.
Why is familiarity with the area important
could help with network in the area but also can miss a better or more appropriate location.
Why is labour pool important
what type of workers are needed for a specific business (i.e. university graduates or school leavers). It also refers to places with a high level of unemployment, that will help create more jobs in the area (i.e. Amazon)
Why is infastructure important
refers to infrastructure such as telephone, electricity, internet etc. Also, how accessible services are, depending of the type of business (i.e. schools and hospitals for oil engineers)
Why are suppliers important
how close and available suppliers are. For different types of business this is key (i.e. seafood restaurant)
Why is government important
the role of the Government is crucial for some business that might consider relocating to a deprived area. The Government might offer help in the form of Subsidies or grants. It’s “win-win” situation“. The Government can also offer “tax relief” in some cases
Why are national, regional and international factors important
nowadays business do not need to be located near the immediate vicinity. Sources of communication changed immensely (i.e. call centres). This also refers to the fact that Trading Blocs such as EU or NAFTA might have influence in opening a business that serves the whole market (i.e. Nissan’s car factory in France to serve all Europe. Nissan’s factory was originally in England but had to relocate due to Brexit )
What is a pull factor
how to attract a company towards a specific location. For the company it might me attractive to relocate abroad due to:
•Improved communications
•Dismantling of trade barriers
•Deregulation of the worlds financial markets
•Increasing size of multinational companies.
What is a push factor
how to push a company to relocate overseas. There are some internal factors that may drive the companies to move overseas, such as:
•Reduce Costs
•Increase market share
•Use extension strategies
•Use defensive strategies
What is outsourcing
Transferring some of the operations to another organisation
E.g. call centers, audit
What are some positive and negatives of outsourcing
P - cost reduction, reliance on professionals, oppertunity to focus on core
N - having to rely on subcontractors, threat to brand value
What is insourcing
Brining operations back
E.g. firing an ad agency in favor of a internal marketing department
What are some positive and negatives of insourcing
P - full control of operations
N - having to deal with new tasks
What is offshoring
Transferring some of operations abroad
Not necessarily to another organisation
E.g. manufacturing goods in china, call center in india
What is a positive and negative of offshoring
P - cost reduction, avoiding protectionism
N - exchange rates not in favor, communication barriers, cultural gap/clash
What is resharing
What is reshoring
Brining offshoring operations back to home country
What is a positive and negative of reshoring
P - enhanced brand image
N - having to deal with new tasks
What BMT can be used to chose location or relocation
- desition trees
- force field analysis
What is force field analysis
method for listing, discussing, and evaluating the various forces for and against a proposed change. When a change is planned, Force Field Analysis helps you look at the big picture by analysing all of the forces impacting the change and weighing the pros and cons.
What are the 4 steps involved in a FFA
1.Determine the change factor and highlight it.
2.After brainstorming ideas for the change, they are listed in a positive and negative manner. That is, driving forces (positive) and restraining forces (negative).
3.Each factors is given a weight corresponding to the factor’s importance, from 1 (weak) to 5 (strong). Arrows maybe used her for simplicity.
4.The forces then are all added up , totalling the scores for each of the forces. Of course, the highest value is the best decision
What are the 3 benefits of a FFA
- gives a clear answer to a dificultades decision
- flexible - can be applied to many situations
- simple and visually attractive
What are 3 limitations of a FFA
- is based on qualities data, not quantative issues
- involves interpretation in determining which factos to include
- is based on estimates of the value of each individual factor
