Location And Scale (AL) Flashcards
Optimal location
a business location that gives best combination of qualitative and quantitative factors
Optimal location is likely to compromise that balances
-High fixed cost of site and convince for customers and potential
-Low costs of a remote site and the limited supply of qualified labour
-Qualitative and quantitative factors
-Opportunities of receiving govt grants with risks of low sales due to low incomes in the area
Quantitative facts that determine location and relocation
-Site costs and other fixed costs
-Labour costs
-Transport costs
-Potential revenue
-Govt grants
-External economies and diseconomies of scale
-Investment appraisal
-Break even analysis
Local, national and international decisions
-Local refers to business that often have a branch or office that is close to the owners home
-National refers to much larger business that operate in many branches in different regions of a country
-International refers to MNC’s
Qualitative factors that determine location and relocation
-Safety
-Space for further expansion
-Ethical considerations
-Environmental concerns
-Infrastructure
-Planning restrictions
Offshoring
Relocation of a business form one country to another country
Reasons for offshoring
-Reducing costs (labour)
-Supply of well qualified labour
-Avoiding protectionist trade barriers
-Overcoming problems from exchange rate fluctuations (pricing decisions become harder)
Reshoring
Transferring business operations that was moved overseas back to the original location
Reasons for reshoring
-Cultural differences
-Product quality and level of service concerns
-Supply chains concerns
-Ethical considerations
Factors that influence the scale of operations of a business
-Owners objectives
-Capital available
-Size of market
-Number of competitors
-Scope for economies of scale
Internal economies of scales
-Purchasing economies
-Technical economies
-Financial economies
-Marketing economies
-Managerial economes
Internal diseconomies of scale
-Communication problems
-Alienation of workforces
-Poor coordination
Overcoming internal diseconomies of scale
-Management by objectives
-Decentralisation
-Reduce diversification
External economies of scale
-Qualified labour in the area
-Local uni and training centres in area to supply suitable labour
-Easier to arrange joint ventures when businesses are located close together
External diseconomies of scale
-Cost increases for land in area
-Increased demand for labour in area
