Chapter 8 Flashcards
Why are location decisions strategically important?
Because they represent long term commitment of scarce resources
What are the six things that location planning can impact ?
- Competitive advantage
- Organization
- Financing
- Capacity and flexibility
- Revenues
- Supply chain
What are the 5 reasons for moving into a new location?
- New markets 2. Changes in Market 3. Depletion of raw materials 4. Expansion will not satisfy demands, so moving away is better 5. cost of business is too much, time to move away
Planning a location general procedure? 5 steps
- Determine technique for evaluating location 2. Identify operational factors such as markets and supplier 3. Determine alternatives 4. Use decision making technique to evaluate the alternatives 5. Select the location
Location cost profit volume analysis is used to evaluate locations in purely ____________.
Economic terms
Locational cost profit volume analysis assumptions? (4)
- Only 1 product is produced 2. Level of output can be estimated 3. Fixed costs are constant 4. Variable costs are linear
What is the factor rating method
A method that use qualitative and quantitative data
Quantitative
Hard data Statistical research
Qualitative
Soft data Surveys and social questioning
8 parts of the factor rating general procedure
Basically you are making a game… Qualitative or Quantitative 1. Determine relevant factors 2. Decide on common scale 3. Assign weight to factors 4. Set minimum 5. Score each factor 6. Multiply the score by factor weight and add the scores 7. Choose location with highest score
What do you do if the factor rating general procedure fails?
Reevaluate and start all over
What is the transportation model?
A technique used when transportation location and cost will effect production
What is the center of gravity model
Used to evaluate distribution centers Sometime uses Geographic information system GIS
Center of gravity Assumptions? (2)
Shipping quantities are fixed Distribution costs are linear
Expansion Decision alternatives…(4)
- We can expand existing building 2. Add new location 3. Shutdown existing facility after moving to new place 4. Do nothing
What is an example of a product plant?
Harley Davidson No matter where the demand is, the product will only be made in one place!! WISCOOO
What is an example of process plant?
Ford They use raw materials to make a new product
What is an example of a market area?
Miller-Coors They will market in only one area
The tendency of similar service and retail businesses to locate near each other?
Clustering
GATT
General Agreement of Trade and Tarrifs Reduced barriers to international trade
EEC
European economic community Promotion of free trade in Europe
WTO
World trade organization Enforce the General agreement on Tarriffs and trade rules, and regulate disputes Basically the referee of the trade world
NAFTA
North American Free Trade Agreement Eliminated free trade between Canada US and Mexico
When was the Internet invented?
1995
Global location decision- opportunities (4)
1.Access new markets 2.cost saving 3.Relaxed regulations 4.Minimal currency fluctuations
Global Location Decisions-Risks (5)
- Changes in laws 2. Ethics 3.Terrorism 4.Economic instability 5.Cultural differences
Global Location Decisions-Challenges (5)
- Public image 2. Restrictions 3. Labor 4. Security 5. Increased costs
What is location planning and analysis ?
Involves finding the right place to grow and expand
