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Location Strategies Presentation Transcript

  • 1. OPERATIONS MANAGEMENT 1
  • 2.  CENTRAL HUB CONCEPT  ENABLES SERVICE TO MORE LOCATIONS WITH FEWER AIRCRAFT  ENABLES MATCHING OF AIRCRAFT FLIGHTS WITH PACKAGE LOADS  REDUCES MISHANDLING AND DELAY IN TRANSIT BECAUSE THERE IS TOTAL CONTROL OF PACKAGES FROM PICKUP TO DELIVERY 2
  • 3.  THE STRATEGIC IMPORTANCE OF LOCATION FACTORS THAT AFFECT LOCATION DECISION METHODS OF EVALUATING LOCATION ALTERNATIVES SERVICE LOCATION STRATEGY 3
  • 4. • ONE OF THE MOST IMPORTANT DECISIONS ATHE OBJECTIVE FIRM MAKESOF LOCATION • INCREASINGLY GLOBAL INSTRATEGY IS NATURE TO MAXIMIZE • SIGNIFICANT IMPACT ON FIXED AND VARIABLETHE BENEFIT OF COSTS LOCATION TO • DECISIONS MADE THE FIRM RELATIVELY INFREQUENTLY
  • 5. LOCATION OPTION INCLUDES: EXPANDING AN EXISTING FACILITY INSTEAD OF MOVING MAINTAINING CURRENT SITES WHILE ADDING ANOTHER FACILITY ELSEWHERE, OR CLOSING THE EXISTING FACILITY AND MOVING TO ANOTHER LOCATION
  • 6.  LOCATION DECISIONS BASED ON LOW COST REQUIRE CAREFUL CONSIDERATION ONCE IN PLACE, LOCATION-RELATED COSTS ARE FIXED IN PLACE AND DIFFICULT TO REDUCE DETERMINING OPTIMAL FACILITY LOCATION IS A GOOD INVESTMENT 6
  • 7. FOUR KEY ATTRIBUTES WHEN STRATEGY IS BASED ON INNOVATION HIGH-QUALITY AND SPECIALIZED INPUTS AN ENVIRONMENT THAT ENCOURAGES INVESTMENT AND LOCAL RIVALRY A SOPHISTICATED LOCAL MARKET LOCAL PRESENCE OF RELATED AND SUPPORTING INDUSTRIES 7
  • 8. KEY SUCCESS FACTORS COUNTRY  POLITICAL RISKS, GOVERNMENTGLOBALIZATION DECISION RULES, ATTITUDES, INCENTIVES  CULTURAL AND ECONOMIC REGION / ISSUES COMMUNITY  LOCATION OF MARKETS DECISION  LABOR TALENT, ATTITUDES, PRODUCTIVITY & COSTS  AVAILABILITY OF SUPPLIES, SITE COMMUNICATIONS, ENERGY DECISION  EXCHANGE RATES AND CURRENCY RISKS 8
  • 9. KEY SUCCESS FACTORS  CORPORATE DESIRES  ATTRACTIVENESS OF REGIONGLOBALIZATION  LABOR AVAILABILITY AND COSTS REGION /  COSTS AND AVAILABILITY OF COMMUNITY UTILITIES DECISION  ENVIRONMENTAL REGULATIONS  GOVERNMENT INCENTIVES AND FISCAL POLICIES  PROXIMITY TO RAW MATERIALS AND CUSTOMERS  LAND/CONSTRUCTION COSTS 9
  • 10. KEY SUCCESS FACTORS COUNTRY  SITE SIZE AND COSTGLOBALIZATION DECISION  AIR, RAIL, HIGHWAY, AND REGION / WATERWAY SYSTEMS COMMUNITY  ZONING RESTRICTIONS DECISION  PROXIMITY OF SERVICES/ SUPPLIES NEEDED SITE DECISION  ENVIRONMENTAL IMPACT ISSUES 10
  • 11. THE GLOBAL COMPETITIVENESS INDEX 2011-2012 RANKINGS© 2011 WORLD ECONOMIC FORUM | www.weforum.org/gcr GCI 2010- GCI 2011-2012 2011 COUNTRY/ECONOMY RANK SCORE RANK CHANGESWITZERLAND 1 5.74 1 0SINGAPORE 2 5.63 3 1UNITED STATES 5 5.43 4 -1JAPAN 9 5.40 6 -3UNITED KINGDOM 10 5.39 12 2AUSTRALIA 20 5.11 16 -4MALAYSIA 21 5.08 26 5THAILAND 39 4.52 38 -1VIETNAM 65 4.24 59 -6PHILIPPINES 75 4.08 85 10CHAD 142 2.87 139 -3
  • 12. LABOR PRODUCTIVITY WAGE RATES ARE NOT EXCHANGE RATES & THE ONLY COST CURRENCY RISK COSTS LOWER PRODUCTIVITY POLITICAL MAY INCREASE TOTAL RISK, VALUES & CULTURE COST PROXIMITY TO MARKETS LABOR COST PROXIMITY TO PER DAY COST SUPPLIERS = PER UNIT PRODUCTIVITYPROXIMITY TOCOMPETITORS (UNITS PER DAY) 12
  • 13. LABOR PRODUCTIVITY CONNECTICUT EXCHANGE RATES & $70 = $1.17 PER UNIT CURRENCY RISK : EXAMPLEIF QUALITY COILS PAYS 60 UNITS $70 PER 60 UNITS COSTS PRODUCED PER DAY IN Juarez $25 CONNECTICUTISK,WILL POLITICAL R , IT VALUES & CULTURE = $1.25 PER UNIT SPEND LESS ON LABOR 20 units THAN AT A MEXICAN PROXIMITY TO MARKETS PLANT THAT PAYS $25 LABOR COST PROXIMITY TO PER DAY WITH PER DAY COST SUPPLIERS PRODUCTION OF 20 = PER UNIT PRODUCTIVITYPROXIMITY TO DAY UNITS PERCOMPETITORS (UNITS PER DAY) 13
  • 14. LABOR PRODUCTIVITY EXCHANGE RATES & CAN HAVE A SIGNIFICANT CURRENCY RISK IMPACT ON COSTS COSTS POLITICAL RISK, RATES CHANGE OVER VALUES & CULTURE TIME PROXIMITY TO MARKETS PROXIMITY TO SUPPLIERSPROXIMITY TOCOMPETITORS 14
  • 15. LABOR PRODUCTIVITY TANGIBLE : EASILY EXCHANGE RATES & MEASURED COSTS SUCH CURRENCY RISK AS COSTS UTILITIES, LABOR, MATERI ALS, TAXES POLITICAL RISK, VALUES & CULTURE INTANGIBLE : LESS PROXIMITY TO EASY TO QUANTIFY AND MARKETS INCLUDE PROXIMITY TO EDUCATION, PUBLIC SUPPLIERS TRANSPORTATION, COMMPROXIMITY TOCOMPETITORS UNITY, QUALITY-OF-LIFE 15
  • 16. LABOR PRODUCTIVITY • NATIONAL, STATE, EXCHANGE RATES & LOCAL GOVERNMENTS CURRENCY RISK ATTITUDES TOWARD COSTS PRIVATE AND INTELLECTUAL POLITICAL RISK, PROPERTY, ZONING, VALUES & CULTURE POLLUTION, PROXIMITY TO EMPLOYMENT MARKETS STABILITY MAY BE IN PROXIMITY TO FLUX SUPPLIERSPROXIMITY TOCOMPETITORS 16
  • 17. CORRUPTION PERCEPTIONS INDEX 2011 SOURCE: TRANSPARENCY INTERNATIONAL THE GLOBAL COALITION AGAINST CORRUPTION
  • 18. LABOR PRODUCTIVITY • WORKER ATTITUDES EXCHANGE RATES & TOWARDS CURRENCY RISK TURNOVER, UNIONS, AB COSTS SENTEEISM POLITICAL RISK, VALUES & CULTURE • GLOBALLY CULTURES HAVE DIFFERENT PROXIMITY TO ATTITUDES TOWARDS MARKETS PUNCTUALITY, LEGAL, A PROXIMITY TO ND ETHICAL ISSUES SUPPLIERSPROXIMITY TOCOMPETITORS 18
  • 19. LABOR PRODUCTIVITY VERY IMPORTANT TO EXCHANGE RATES & SERVICES CURRENCY RISK COSTS JIT SYSTEMS OR HIGH POLITICAL RISK, VALUES & CULTURE TRANSPORTATION COSTS PROXIMITY TO MAY MAKE IT IMPORTANT MARKETS TO MANUFACTURERS PROXIMITY TO SUPPLIERSPROXIMITY TOCOMPETITORS 19
  • 20. LABOR PRODUCTIVITY PERISHABLE GOODS, EXCHANGE RATES & HIGH TRANSPORTATION CURRENCY RISK COSTS, BULKY PRODUCTS COSTS POLITICAL RISK, VALUES & CULTURE PROXIMITY TO MARKETS PROXIMITY TO SUPPLIERSPROXIMITY TOCOMPETITORS 20
  • 21. LABOR PRODUCTIVITY  CALLED CLUSTERING EXCHANGE RATES & CURRENCY RISK  OFTEN DRIVEN BY COSTS RESOURCES SUCH AS POLITICAL NATURAL RISK, VALUES & CULTURE RESOURCES, INFORMATIO PROXIMITY TO MARKETS N, CAPITAL, TALENT PROXIMITY TO  FOUND IN BOTH SUPPLIERS MANUFACTURING ANDPROXIMITY TOCOMPETITORS SERVICE INDUSTRIES 21
  • 22. INDUSTRY LOCATIONS REASON FOR CLUSTERING NAPA VALLEY (US) NATURAL RESOURCESWINE MAKING BORDEAUX REGION OF LAND AND CLIMATE (FRANCE) TALENT RESOURCES OFSOFTWARE SILICON VALLEY, BRIGHT GRADUATES INFIRMS BOSTON, SCIENTIFIC/TECHNICAL BANGALORE (INDIA) AREAS, VENTURE CAPITALISTS NEARBYRACE CAR HUNTINGTON/NOR CRITICAL MASS OF TH HAMPTON TALENT ANDBUILDERS REGION (ENGLAND) INFORMATION 22
  • 23. INDUSTRY LOCATIONS REASON FOR CLUSTERINGTHEME PARKS A HOT SPOT FOR(DISNEY WORLD, ORLANDO, FLORIDA ENTERTAINMENT, WARMUNIVERSAL WEATHER, TOURISTS,STUDIOS) AND INEXPENSIVE LABORELECTRONICS NORTHERN MEXICO NAFTA, DUTY FREEFIRMS EXPORT TO US HIGH TECHNOLOGICAL PENETRATION RATE ANDCOMPUTER PER CAPITA GDP,HARDWARE SINGAPORE, TAIWAN SKILLED/EDUCATEDMANUFACTURERS WORKFORCE WITH LARGE POOL OF ENGINEERS 23
  • 24. FACTOR-RATING METHODLOCATIONALBREAK-EVEN ANALYSISCENTER-OF-GRAVITY METHODTRANSPORTATION MODEL 24
  • 25. POPULAR BECAUSE A WIDE VARIETY OF FACTORS CANBE INCLUDED (FROM EDUCATION, TO EDUCATION TOLABOR SKILLS) IN THE ANALYSISEXAMPLE: FIVE FLAGS OVER FLORIDA, A U.S. CHAIN OF 10FAMILY-ORIENTED THEME PARKS, HAS DECIDED TOEXPAND OVERSEAS BY OPENING ITS FIRST THEMEPARK IN EUROPE. IT WISHES TO SELECT BETWEENFRANCE & DENMARK. 25
  • 26. KEY SUCCESS WEIGHT SCORES (OUT OF 100) WEIGHTED SCORES FACTORS FRANCE DENMARK FRANCE DENMARKLABORAVAILABILITY 0.25 70 60 (.25)(70) = 17.5 (.25)(60) = 15.0AND ATTITUDEPEOPLE-TO- 0.05 50 60 (.05)(50) = 2.5 (.05)(60) = 3.0CAR RATIOPER CAPITAL 0.1 85 80 (.10)(85) = 8.5 (.10)(80) = 8.0INCOMETAX 0.39 75 70 (.39)(75) = 29.3 (.39)(70) = 27.3STRUCTUREEDUCATION 0.21 60 70 (.21)(60) = 12.6 (.21)(70) = 14.7AND HEALTH 1 70.4 681ST: DEVELOP A LIST OF RELEVANT FACTORS CALLED KEYSUCCESS FACTORS 26
  • 27. KEY SUCCESS WEIGHT SCORES (OUT OF 100) WEIGHTED SCORES FACTORS FRANCE DENMARK FRANCE DENMARKLABORAVAILABILITY 0.25 70 60 (.25)(70) = 17.5 (.25)(60) = 15.0AND ATTITUDEPEOPLE-TO- 0.05 50 60 (.05)(50) = 2.5 (.05)(60) = 3.0CAR RATIOPER CAPITAL 0.1 85 80 (.10)(85) = 8.5 (.10)(80) = 8.0INCOMETAX 0.39 75 70 (.39)(75) = 29.3 (.39)(70) = 27.3STRUCTUREEDUCATION 0.21 60 70 (.21)(60) = 12.6 (.21)(70) = 14.7AND HEALTH 1 70.4 681ST: :DEVELOP A LIST OF RELEVANT FACTORS2ND ASSIGN A WEIGHT TO EACH FACTOR CALLED KEYSUCCESS FACTORS 27
  • 28. KEY SUCCESS WEIGHT SCORES (OUT OF 100) WEIGHTED SCORES FACTORS FRANCE DENMARK FRANCE DENMARKLABORAVAILABILITY 0.25 70 60 (.25)(70) = 17.5 (.25)(60) = 15.0AND ATTITUDEPEOPLE-TO- 0.05 50 60 (.05)(50) = 2.5 (.05)(60) = 3.0CAR RATIOPER CAPITAL 0.1 85 80 (.10)(85) = 8.5 (.10)(80) = 8.0INCOMETAX 0.39 75 70 (.39)(75) = 29.3 (.39)(70) = 27.3STRUCTUREEDUCATION 0.21 60 70 (.21)(60) = 12.6 (.21)(70) = 14.7AND HEALTH 1 70.4 681ST: : DEVELOP A SCALE FOR EACH FACTOR3RD DEVELOP LIST OF RELEVANT FACTORS CALLED KEYSUCCESS FACTORS 28
  • 29. KEY SUCCESS WEIGHT SCORES (OUT OF 100) WEIGHTED SCORES FACTORS FRANCE DENMARK FRANCE DENMARKLABORAVAILABILITY 0.25 70 60 (.25)(70) = 17.5 (.25)(60) = 15.0AND ATTITUDEPEOPLE-TO- 0.05 50 60 (.05)(50) = 2.5 (.05)(60) = 3.0CAR RATIOPER CAPITAL 0.1 85 80 (.10)(85) = 8.5 (.10)(80) = 8.0INCOMETAX 0.39 75 70 (.39)(75) = 29.3 (.39)(70) = 27.3STRUCTUREEDUCATIONAND HEALTH 0.21 60 70 (.21)(60) = 12.6 (.21)(70) = 14.7 1 70.4 681ST: :DEVELOP A LIST OF RELEVANT FACTORS CALLED4TH SCORE EACH LOCATION FOR EACH FACTOR KEYSUCCESS FACTORS 29
  • 30. KEY SUCCESS FACTORS WEIGHT SCORES (OUT OF 100) WEIGHTED SCORES FRANCE DENMARK FRANCE DENMARKLABORAVAILABILITY 0.25 70 60 (.25)(70) = 17.5 (.25)(60) = 15.0AND ATTITUDEPEOPLE-TO- 0.05 50 60 (.05)(50) = 2.5 (.05)(60) = 3.0CAR RATIOPER CAPITAL 0.1 85 80 (.10)(85) = 8.5 (.10)(80) = 8.0INCOMETAX 0.39 75 70 (.39)(75) = 29.3 (.39)(70) = 27.3STRUCTUREEDUCATIONAND HEALTH 0.21 60 70 (.21)(60) = 12.6 (.21)(70) = 14.7 1 70.4 681ST: : DEVELOP A LIST OF RELEVANTFOR EACH FACTOR FOR5TH MULTIPLY SCORE BY WEIGHTS FACTORS CALLED KEYEACH LOCATIONSUCCESS FACTORS 30
  • 31. KEY SUCCESS FACTORS WEIGHT SCORES (OUT OF 100) WEIGHTED SCORES FRANCE DENMARK FRANCE DENMARKLABORAVAILABILITY 0.25 70 60 (.25)(70) = 17.5 (.25)(60) = 15.0AND ATTITUDEPEOPLE-TO- 0.05 50 60 (.05)(50) = 2.5 (.05)(60) = 3.0CAR RATIOPER CAPITAL 0.1 85 80 (.10)(85) = 8.5 (.10)(80) = 8.0INCOMETAX 0.39 75 70 (.39)(75) = 29.3 (.39)(70) = 27.3STRUCTUREEDUCATIONAND HEALTH 0.21 60 70 (.21)(60) = 12.6 (.21)(70) = 14.7 1 70.4 681ST: :DEVELOP A LIST OF RELEVANT FACTORS CALLED KEY6TH RECOMMEND THE LOCATION WITH THE HIGHEST POINTSCORESUCCESS FACTORS 31
  • 32. METHOD OF COST-VOLUME ANALYSIS TO MAKE ANECONOMIC COMPARISON OF LOCATION ALTERNATIVESEXAMPLE: JOHN KROS, OWNER OF CAROLINA IGNITIONSMANUFACTURING NEEDS TO EXPAND HIS CAPACITY.HE IS CONSIDERING THREE LOCATIONS—AKRON,BOWLING & CHICAGO—FOR A NEW PLANT. THECOMPANY WISHES TO FIND THE MOST ECONOMICALLOCATION FOR AN EXPECTED VOLUME OF 2,000UNITS PER YEAR 32
  • 33. AKRON BOWLING GREEN CHICAGOFIXED COST 30,000 60,000 110,000VARIABLE COST 75 45 25SELLING PRICE 120 120 120TOTAL COST = FIXED COST + (VARIABLE COST X VOLUME)AKRON 30,000 + (75*2000) = 180,000BOWLING GREEN 60,000 + (45*2000) = 150,000CHICAGO 110,000 + (25*2000) = 160,0001ST: DETERMINE FIXED AND VARIABLE COSTS FOREACH LOCATION 33
  • 34. – $180,000 – – $160,000 – $150,000 – – $130,000 – ANNUAL COST – $110,000 – – – $80,000 – – $60,000 – – – $30,000 – – $10,000 – | | | | | | | – 0 500 1,000 1,500 2,000 2,500 3,000FIGURE 8.2 VOLUME2ND: PLOT THE COST FOR EACH LOCATION
  • 35. – $180,000 – – $160,000 – $150,000 – – $130,000 – ANNUAL COST – $110,000 – – – $80,000 – – $60,000 – – – AKRON CHICAGO $30,000 – BOWLING GREEN LOWEST LOWEST COST – LOWEST COST COST $10,000 – | | | | | | | – 0 500 1,000 1,500 2,000 2,500 3,000FIGURE 8.2 VOLUME3RD: SELECT LOCATION WITH LOWEST TOTAL COSTFOR EXPECTED PRODUCTION VOLUME
  • 36. THE CROSSOVER POINT FOR AKRON & BOWLING GREEN IS: 30,000 + 75X = 60,000 + 45X 30X = 30,000 X = 1,000THE CROSSOVER POINT FOR BOWLING GREEN & CHICAGO IS: 60,000 + 45X = 110,000 + 25X 20X = 50,000 X = 2,500 36
  • 37. FINDS LOCATION OF DISTRIBUTION CENTER THATMINIMIZES DISTRIBUTION COSTSCONSIDERS:  LOCATION OF MARKETS  VOLUME OF GOODS SHIPPED TO THOSE MARKETS  SHIPPING COST (OR DISTANCE) 37
  • 38.  PLACE EXISTING LOCATIONS ON A COORDINATE GRID  GRID ORIGIN AND SCALE IS ARBITRARY  MAINTAIN RELATIVE DISTANCES CALCULATE X AND Y COORDINATES FOR ‘CENTER OF GRAVITY’  ASSUMES COST IS DIRECTLY PROPORTIONAL TO DISTANCE AND VOLUME SHIPPED
  • 39. ∑dixQi i x - COORDINATE = ∑Qi i ∑diyQi i y - COORDINATE = ∑Qi iWHERE dix = x- COORDINATE OF LOCATION i diy = y- COORDINATE OF LOCATION i Qi = QUANTITY OF GOODS MOVED TO OR FROM LOCATION i
  • 40. NORTH-SOUTH NEW YORK (130, 130) CHICAGO (30, 120) 120 – PITTSBURGH (90, 110) 90 – 60 – 30 – ATLANTA (60, 40) – | | | | | | EAST-WEST 30 60 90 120 150 ARBITRARY ORIGIN FIGURE 8.3
  • 41. NUMBER OF CONTAINERS STORE LOCATION SHIPPED PER MONTH CHICAGO (30, 120) 2,000 PITTSBURGH (90, 110) 1,000 NEW YORK (130, 130) 1,000 ATLANTA (60, 40) 2,000 (30)(2000) + (90)(1000) + (130)(1000) + (60)(2000)X-COORDINATE = 2000 + 1000 + 1000 + 2000 = 66.7 (120)(2000) + (110)(1000) + (130)(1000) + (40)(2000)Y-COORDINATE = 2000 + 1000 + 1000 + 2000 = 93.3
  • 42. NORTH-SOUTH NEW YORK (130, 130) CHICAGO (30, 120) 120 – PITTSBURGH (90, 110) 90 – + CENTER OF GRAVITY (66.7, 93.3) 60 – 30 – ATLANTA (60, 40) – | | | | | | EAST-WEST 30 60 90 120 150 ARBITRARY ORIGIN FIGURE 8.3
  • 43.  FINDS AMOUNT TO BE SHIPPED FROM SEVERAL POINTS OF SUPPLY TO SEVERAL POINTS OF DEMAND SOLUTION WILL MINIMIZE TOTAL PRODUCTION AND SHIPPING COSTS A SPECIAL CLASS OF LINEAR PROGRAMMING PROBLEMS 43
  • 44. Figure 8.4
  • 45.  PURCHASING POWER OF CUSTOMER-DRAWING AREA SERVICE AND IMAGE COMPATIBILITY WITH DEMOGRAPHICS OF THE CUSTOMER-DRAWING AREA COMPETITION IN THE AREA QUALITY OF THE COMPETITION UNIQUENESS OF THE FIRM’S AND COMPETITORS’ LOCATIONS PHYSICAL QUALITIES OF FACILITIES AND NEIGHBORING BUSINESSES OPERATING POLICIES OF THE FIRM QUALITY OF MANAGEMENT 45
  • 46. SERVICE/RETAIL/PROFESSIONAL GOODS-PRODUCING LOCATION LOCATION REVENUE FOCUS COST FOCUSVOLUME/REVENUE TANGIBLE COSTS DRAWING AREA; PURCHASING TRANSPORTATION COST OF RAW POWER MATERIAL COMPETITION; ADVERTISING/PRICING SHIPMENT COST OF FINISHED GOODS ENERGY AND UTILITY COST; LABOR;PHYSICAL QUALITY RAW MATERIAL; TAXES, AND SO ON PARKING/ACCESS; SECURITY/LIGHTING; APPEARANCE/IMAGE INTANGIBLE AND FUTURE COSTSCOST DETERMINANTS ATTITUDE TOWARD UNION RENT QUALITY OF LIFE MANAGEMENT CALIBER EDUCATION EXPENDITURES BY STATE OPERATIONS POLICIES (HOURS, QUALITY OF STATE AND LOCAL WAGE RATES) GOVERNMENT 46
  • 47. SERVICE/RETAIL/PROFESSIONAL GOODS-PRODUCING LOCATION LOCATION REVENUE FOCUS TECHNIQUES COST FOCUS TECHNIQUESVOLUME/REVENUE TANGIBLE COSTSREGRESSION MODELS TO DETERMINE DRAWING AREA; PURCHASING TRANSPORTATION COST OF RAW POWER T MATERIAL RANSPORTATION METHODIMPORTANCE OF VARIOUS FACTORS COMPETITION; ADVERTISING/PRICING SHIPMENT COST OF FINISHED GOODSFACTOR-RATING METHOD FACTOR-RATING METHOD ; LABOR; ENERGY AND UTILITY COSTPRAFFIC COUNTSTHYSICAL QUALITY RAW MATERIAL; TAXES, AND SO ON LOCATIONAL BREAK-EVEN ANALYSIS PARKING/ACCESS;DEMOGRAPHIC ANALYSIS OF DRAWING SECURITY/LIGHTING; APPEARANCE/IMAGE CROSSOVER CHARTS INTANGIBLE AND FUTURE COSTSAREACOST DETERMINANTS ATTITUDE TOWARD UNIONPURCHASING POWER ANALYSIS OF RENT QUALITY OF LIFE MANAGEMENT CALIBERAREA EDUCATION EXPENDITURES BY STATECENTER-OF-GRAVITY METHOD , OPERATIONS POLICIES (HOURS WAGE RATES) QUALITY OF STATE AND LOCAL GOVERNMENTGEOGRAPHIC INFORMATION SYSTEMS 47
  • 48. SERVICE/RETAIL/PROFESSIONAL GOODS-PRODUCING LOCATION LOCATION REVENUE FOCUS ASSUMPTIONS COST FOCUS ASSUMPTIONSVOLUME/REVENUE TANGIBLE COSTSLOCATION ISAREA; PURCHASING DRAWING A MAJOR DETERMINANT LOCATION IS A MAJOR DETERMINANT TRANSPORTATION COST OF RAW POWEROF REVENUE MATERIAL OF COST COMPETITION; ADVERTISING/PRICING SHIPMENT COST OF FINISHED GOODSHIGH CUSTOMER-CONTACT ISSUES ARE MENERGY AND UTILITY COST; LABOR; OST MAJOR COSTS CAN BEPHYSICAL QUALITY RAW MATERIAL; TAXES, AND SO ONCRITICAL IDENTIFIED EXPLICITLY FOR EACH SITECOSTS ARE RELATIVELY CONSTANT FOR LOW CUSTOMER CONTACT ALLOWSA GIVEN AREA; THEREFORE, THE FOCUS ON THE IDENTIFIABLE COSTSREVENUE FUNCTION IS CRITICAL INTANGIBLE COSTS CAN BE EVALUATED 48
  • 49.  LOCATION IS A STRATEGICALLY IMPORTANT DECISION IN THE HOSPITALITY INDUSTRY LA QUINTA STARTED WITH 35 INDEPENDENT VARIABLES AND WORKED TO REFINE A REGRESSION MODEL TO PREDICT PROFITABILITY THE FINAL MODEL HAD ONLY FOUR VARIABLES • PRICE OF THE INN R2 = .51 51% OF THE • MEDIAN INCOME LEVELS PROFITABILITY IS • STATE POPULATION PER INN PREDICTED BY JUST • LOCATION OF NEARBY COLLEGES THESE FOUR VARIABLES!
  • 50. REQUIRES NEITHER FACE-TO-FACE CONTACT NOR MOVEMENT OF MATERIALS HAS VERY BROAD LOCATION OPTIONS TRADITIONAL VARIABLES ARE NO LONGER RELEVANTCOST AND AVAILABILITY OF LABOR MAY DRIVE LOCATION DECISIONS 50
  • 51.  IMPORTANT TOOL TO HELP IN LOCATION ANALYSIS ENABLES MORE COMPLEX DEMOGRAPHIC ANALYSIS AVAILABLE DATA BASES INCLUDE  DETAILED CENSUS DATA  DETAILED MAPS  UTILITIES  GEOGRAPHIC FEATURES  LOCATIONS OF MAJOR SERVICES
  • 52. 53