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FACILITY LOCATION

DEALS WITH QUESTIONS SUCH AS:


 WHERE SHOULD BE THE MAIN OPERATION
BASED
 PROXIMITY TO REQUIRED RESOURCES.
LONG TERM COMMITMENT ABOUT
GEOGRAPHICALLY STATIC FACTORS
AFFECTING ORGANISATION.
NOT EASY TO CHANGE LOCATION ONCE
ESTABLISHED
QUALITATIVE & QUANTITATIVE CHANGE AT
LOCATION POSSIBLE.
INTEGRAL PART OF ORGANISATIONAL
STRATEGIES
 BASED ON ORGANISATION OBJECTIVES,GOALS
AND STRATEGIES FOR LONG TERM FUTURE
 PLANT OR FACILITIES LOCATION IS PRODUCT OF
MARKETING,TECHNOLOGY AND FINANCIAL
STRATEGY
 VOLUMES,TECHNOLOGY,RESOURCES AND
SOCIAL COST AMOUNT TO OPERATIONS
STRATEGY
CHOICE OF REGION AND SITE

CONSIDERATION OF REGION AND SITE DEPENDS


ON FOLLOWING PARAMETERS:
 ORGANISATIONAL STRATEGIES
 EXISTING OPERATING FACILITIES
 MANAGERIAL CONTROL IN HANDLING THESE
FACILITIES
 ENVIROMENTAL CONSIDERATION ON SPECIFIC
REGION
 CONSIDERATION ON VALUE ADDED AND
TRANSPORTATION COST
SITUATION INFLUENCE LOCATION
DECISION
LOCATION DECISION CAN BE OF TWO
DIFFERENT SITUATION:

 LOCATION CHOICE FOR THE FIRST TIME

 LOCATION CHOICE FOR ESTABLISHED


ORGANISATION WITH ONE OR MORE
FACILITIES EXISTING
ALREADY ESTABLISHED
ORGANISATION
PLANTS MANUFACTURING DISTINCT PRODUCTS
OR PRODUCT LINES
EACH PLANT SERVICES THE ENTIRE
MARKET AREA FOR THE ORGANISATION
NECESSARY WHERE TECHNOLOGY AND
RESOURCE INPUTS ARE SPECIALISED
TOO MANY CONTRADICTION WOULD LEAD
TO ROUGH HANDLING
PRODUCT SPECIALISATION NECESSARY IN
HIGHLY COMPETITIVE MARKET
MANUFACTURING PLANTS SUPPLYING
TO SPECIFIC MARKET AREA
PLANT MANUFACTURE ALMOST ALL OF
COMAPANY’S PRODUCT
MARKET PROXIMITY CONDITION
DOMINATES THE RESOURCES AND
TECHNOLOGICAL CONSIDERATION
REQUIRES GREAT DEAL OF COORDINATION
FROM THE CORPORATE OFFICE
MANUFACTURING PLANTS ACCORDING
TO PRODUCT LINE LOCATED IN
VARIOUS MARKET AREA

THIS TYPE OF COMBINATION STRATEGY


POSSIBLE FOR LARGE SCALE
ORGANISATION
PLANTS DIVIDED ON BASIS OF PROCESSES
OR STAGES IN MANUFACTURING

 EACH PROCESS REQUIRE DISTINCTIVELY


DIFFERENT EQUIPMENT CAPABILITIES
 THIS STRATEGY REQUIRE MUCH CENTRALIZED
COORDINATION OF MANUFACTURING ACTIVITIES
 STRATEGY USED BECAUSE OF
DEFENCE/NATIONAL SECURITY CONSIDERATION.
FLEXIBILITY IN ADAPTING CONSTANT
CHANGING PRODUCT NEEDS

 NEW FACILITY HAS TO FIT INTO EXISTING


STRATEGY
 FREQUENT CHANGES TO IMPROVE THE
EFFICIENCY NOT HEALTHY FOR ORGANISATION
 EXPANSION OF FACILITIES AT EXISTING SITE
WITHOUT VIOLATING BUSINESS & MANAGERIAL
OUTLINE
 RELOCATION OF FACILITIES ENTAILS CHANGES IN
TECHNOLOGY AND RESOURCES.
LOCATION CHOICE FOR FIRST TIME

 ORGANISATIONAL STRATEGIES HAVE TO BE


DECIDED UPON BEFORE CHOICE OF LOCATION

 IMPORTANCE OF LONG-TERM STRATEGIES


CANNOT BE OVER EMPHASIZED

 COST ECONOMIES ARE ALWAYS


IMPORTANT,NOT AT THE COST OF LONG-TERM
BUSINESS OBJECTIVES
IDENTIFICATION OF REGION
 ORAGANISATION OBJECTIVES WITH VARIOUS
LONG-TERM CONSIDERATION ABOUT
MARKETING AND TECHNOLOGY SUGGEST
REGION FOR FACILITY
ORGANISATIONAL STRENGTH AND WEAKNESS
ALSO DETERMINES SUITABLE LOCATION FOR
FACILTY

SOCIAL,LEGAL,GEOGRAPHIC AND BUSINESS


ENVIRONMENT SUGGEST A SUITABLE REGION
FOR LOCATING THE OPERATIONS FACILITY
CHOICE OF SITE WITHIN A REGION

LESS DEPENDANT ON THE ORGANISATION


LONG-TERM STRATEGIES
EVALUATING ALTERNATIVE SITE FOR
TANGIBLE OR INTANGIBLE COST
COST ECONOMIES FIGURE PROMINENTLY
AT FINAL STAGE OF FACILITIES-LOCATION
PROBLEM
LOCATION PROBLEM CAN BE APPROACHED
WITH COST-ORIENTED NON-INTERACTIVE
MODELS
GLOBAL LOCATION
TRADE AND FLOWS OF CAPITAL ARE FREER
THAN EARLIER DESPITE FEW HICCUPS
MNC SETTING SHOPS IN INDIA
INDIAN COMPANIES EXTENDING THEIR
OPERATIONS IN OTHER COUNTRIES
VIRTUAL PROXIMITY

 ADVANCES IN TELECOMMUNICATION
TECHNOLOGY,FIRM CAN BE IN VIRTUAL
PROXIMITY TO ITS CUSTOMER
 FIRMS USE THIS SERVICE FOR CONDUCTING
LARGE BUSINESS TRANSACTION
 LOGISTICS A FACTOR IN DECIDING A
LOCATION,MARKETS HAVE TO BE REACHED
 HENCE MARKET PRESENCE IN THE COUNTRY OF
THE CUSTOMERS IS QUITE NECESSARY
VIRTUAL FACTORY
 FIRMS OUTSOURCE PART OF THEIR BUSINESS
PROCESS TO LOCATION SUCH AS INDIA

 FIRMS USE ITS ASSOCIATE FOR OPERATION


FACILITIES

 LOCATION DECISION NOT ALWAYS PERTAIN TO


OWN OPERATION

 SUPPLY CHAIN ARE HAVE SPREAD TO COUNTRIES


ABROAD
REASON FOR FOREIGN LOCATION
REACHING THE CUSTOMER

CAPTURINGSHARE OF MARKET
EXPANDING WORLDWIDE

PROVIDING
SERVICE PROMPTLY &
ECONOMICALLY

COST & EASE OF LOGISTICS IS A REASON


FOR SETTING MANUFACTURING
FACILITIES ABROAD
TANGIBLE REASONS
HOSTCOUNTRY MAY OFFER
SUBSTANTIAL TAX ADVANTAGE COMPARE
TO HOME COUNTRY

COST OF RUNNING OPERATION LESS IN


THAT FOREIGN COUNTRY

COMPANY OVERCOME TARIFF BARRIER
BY EXPORTING ITEMS TO THAT COUNTRY
INTANGIBLE REASON
CUSTOMER-RELATED REASONS
 ACCESIBILITY AN IMPORTANT “SERVICE
QUALITY” DETERMINANT

 FIRM MAY ABLE TO GIVE PERSONAL TOUCH

 INTERACTY CLOSELY WITH CUSTOMER AND


UNDERSTAND THEIR REQUIREMENTS BETTER

 DISCOVER OTHER POTENTIAL CUSTOMER IN


THE FOREIGN LOCATION.
ORGANISATIONAL LEARNING RELATED REASON

 FIRM CAN LEARN ADVANCE TECHNOLOGY


AVAILABLE IN THAT COUNTRY

 FIRM CAN LEARN FROM CUSTOMERS ABROAD

 FIRMS CAN LEARN FROM COMPETITORS


OPERATING IN THAT COUNTRY

 FIRMS MAY ALSO LEARN FROM ITS SUPPLIERS


ABROAD
STRATEGIC REASONS
CAPACITY BUILT COULD BE EFFECTIVE
DETERRENT FOR ENTRY OF COMPETITOR
PHYSICALLY PRESENT IN HOST COUNTRY
MAY GAIN LOCAL& PSYCHOLOGICAL
ADVANTAGE
AVOID POLITICAL RISK BY HAVING
OPERATION IN MULTIPLE COUNTRIES
FIRM CAN BUILD ALTERNATIVE SOURCE OF
SUPPLY
FIRM CAN HUNT FOR HUMAN CAPITAL
CAN BE AN INTERNATIONAL BRAND

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