Unit 5.4

Question 1

Optimal Location

Answer 1

Crucial to success, strategic in nature.
- Selects best site for expansion or for its relocation.
- Best site should maximise the long term profits
- Optimal site is always a compromise between conflicting benefits and drawbacks. (high costs, location, access, transport, pool of employees)

Question 2

Compromise that balances

Answer 2

High costs of site with access for customers and potential sale revenue.
Low costs of a remote site with limited supply of suitability qualified labour.
Quantitative factors with Qualitative factors

Question 3

Quantitative factors influencing locations - have a direct impacts on costs of a site or the revenue

Answer 3

Labour costs, Transport costs, Market potential, Gov grants

Question 4

Measuring quantitative factors

Answer 4

Profit estimates = by comparing the estimated revenue and costs of each location/ site with the highest annual potential may be identified.
Total Revenue - Total Expenses = Profit
Investment Appraisal = location dec. often involve a substantial capital investment. Can be used to identify locations with highest potential returns over a no. of years. (location with the quickest payback)
Break-even Analysis = method of comparing two or more possible locations.

Question 5

Qualitative Factors

Answer 5

Safety, Room for expansion, Managers’ Preferences, Labour supply, Ethical consideration, Environmental concerns, Infrastructure.