http://www.metro.co.uk/news/434025-primark-workers-earn-7p-an-hourKerboodle Case Study – Making location decisions (Time Permitting)
Kerboodle – Innovation Case Study: How 3M do it!AQA Question Sheet
Offshoring – transfer aspects of operations from high-cost countries to low-cost countries.India, China, Brazil, Poland, South Africa, Brazil (India produces over 2 million English speaking graduates per year).Trade Tariffs (Taxes)/ Quotas
Table – Comparative pay rates between India and the UK.
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Kerboodle – Test Yourself: Operational Strategies: Location
Do Now:Innovation Re-cap1. What is meant by the term innovation? 5 minutes2. Why are patents often associated with investment in R&D?3. Explain one benefit of investment in R&D.4. If R&D is high risk then why do firms undertake it? End
Learning ObjectivesBy the end of the lesson you should be able to:1. Understand the importance of an optimal location to the success of a business.2. Apply quantitative and qualitative decisions-making techniques when making location decisions.3. Analyse and evaluate the advantages and disadvantages of multisite locations.4. Analyse and evaluate important issues relating to international location.
What is meant by Optimal Location?Optimal location – a business location thatgives the best combination of quantitative aqualitative factors.Choosing the right location has significanteffects on functional areas, profitability andchances of success.Three key characteristics: Strategic in nature Difficult to reverse Managed by senior leaders/ members of staff
What is the impact of location on the following? Low High variable costs unemployment Close to High fixed costs Rural area competitors Minimum Wage
Quantitative or Qualitative methods of deciding upon locationWhat is meant by Quantitative andQualitative Factors?Quantitative Factors – These aremeasureable on financial terms andwill have a direct impact on either thecosts of a site, revenue from it orprofitability.Qualitative Factors – Non-measureable factors that mayinfluence business decisions.
Westfield Shopping Centre Choose and one qualitative and one quantitative reason why Westfield located in West London. Justify your answer.
Sellafield Nuclear Power Station Choose and one qualitative and one quantitative reason why Sellafield located in Cumbria. Justify your answer.
Primark Production Choose and one qualitative and one quantitative reason why Primark had chosen to produce in otherPrimark – countries such asethical or China and India.unethicalpractice? Justify your answer.
What quantitative techniques can also be used assist in the location decision ?Profit Estimates Investment Break-even AnalysisFirm may compare Appraisal Calculating the break- even point will tell a firmestimated revenue and Location decisions will how much it needs tocosts for each location. involve substantial produce and sell in order capital investment. to avoid making a loss. Therefore Payback, ARRComplete the Profit and NPV can be used.Estimates task in your Use the break-even point formula to decide if Site Ctextbook (P105) Use investment or Site D is most viable appraisal techniques to (P106).Q1 and Q2 decide if Site X or Site Y is most viable (P105). Q1, Q2 and Q3.
Multisite LocationsThis is when a businessoperates from more than onelocation.List as many multisitebusinesses that you can thinkof and note what sector theyoperate in… 2 minutes
What are the advantages anddisadvantages of multisite locations? Advantages DisadvantagesConvenient for customers. Co-ordination problems.Delegation of tasks from If branches or stores are too close to each otherHO. could be risk of competition.Cost advantages of set-upin other countries. Lack of control from HO.
International Location DecisionsOne of the main features ofglobalisation is the growingtrend for businesses torelocate completely toanother country or set up newoperating bases abroad.Write down 3 reasons why abusiness may decide to dothis….
International Location Decisions Access to growing marketsBenefits from greater Minimise impact economies of scale of exchange rates Off-shoring Government incentives Avoid trade barriers
International Location DecisionsOccupation Salary in India % of UK salaryCall centre operator 90p to £1.25 per hour 13-20%Top law graduate £4,700 per year 11-14%Farm worker £500 per year 5%
What are the potential problems of international location?1. Language and cultural differences: E.g. - Working week, public holidays etc2. Economic and political stability: Firms will choose countries with history of stability.3. Impact on public image: Unethical practices such as child labour.4. Diseconomies of scale: Loss of co-ordination, control, communication.
Re-cap Learning ObjectivesYou should now be able to:1. Understand the importance of an optimal location to the success of a business.2. Apply quantitative and qualitative decisions-making techniques when making location decisions.3. Analyse and evaluate the advantages and disadvantages of multisite locations.4. Analyse and evaluate important issues relating to international location.