Key Issue 3Ms. Patten2012
A company usually facestwo geographical costs:   1) site   2) situation
Site Factors   Result from the unique characteristics    of a location   The cost of conducting business varies    among...
Land – modern factories tend to be more   suburban or rural – need for large tracts of land; single story   buildings – ch...
Labor   labor intensive = labor cost is a high    percentage of expenses   highly skilled vs less skilled   clothing: L...
Capital   refers to the availability of investment    funding   California’s Silicon Valley   financial incentives are ...
Situation Factor   Involve transporting materials to and    from a factory    – Transportation of raw materials to factor...
Location Near Inputs   Include resources or parts or materials    made by other companies    (outsourced)   Copper Indus...
Location Near Markets   Bulk Gaining    – Gains volume or weight during production    – Soft drinks/fabricated metals   ...
Ship, Rail, Truck or Air   The farther something is transported the    lower the cost per mile    – Decreases at differen...
Upcoming SlideShare
Loading in …5
×

Key Issue 3

789 views

Published on

Published in: Business, Technology
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
789
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
4
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Key Issue 3

  1. 1. Key Issue 3Ms. Patten2012
  2. 2. A company usually facestwo geographical costs: 1) site 2) situation
  3. 3. Site Factors Result from the unique characteristics of a location The cost of conducting business varies among locations, depending on the costs of three factors – Land – Labor – Capital
  4. 4. Land – modern factories tend to be more suburban or rural – need for large tracts of land; single story buildings – cheaper in rural or suburban locations – accessible to energy sources: water, wood, coal, hydropower – other amenities including climate, recreation, culture, topography, cost of living
  5. 5. Labor labor intensive = labor cost is a high percentage of expenses highly skilled vs less skilled clothing: LDC’s (Asia); in US from NE to SE (less union) Levi’s: no plants in US after Dec 2003; jobs have been outsourced to China wool remains in NE electronics requires skilled workers in NY, Mass, CA near major University centers
  6. 6. Capital refers to the availability of investment funding California’s Silicon Valley financial incentives are a means of luring a business to locate in your community; incentives include grants, low cost loans, tax breaks
  7. 7. Situation Factor Involve transporting materials to and from a factory – Transportation of raw materials to factory – Transportation of finished goods to market
  8. 8. Location Near Inputs Include resources or parts or materials made by other companies (outsourced) Copper Industry-Arizona – BR: final product weighs less than inputs – Also energy hungry Steel Industry – Map on page 382
  9. 9. Location Near Markets Bulk Gaining – Gains volume or weight during production – Soft drinks/fabricated metals Single Market Manufacturers – High fashion apparel/motor vehicle parts Perishable Products – Dairy/newspapers
  10. 10. Ship, Rail, Truck or Air The farther something is transported the lower the cost per mile – Decreases at different rates for each mode because loading/unloading costs vary with mode Trucks used most often for short distance Trains used most often for long distance Ship is attractive for longest distances Air most expensive alternative but valued for speedy delivery of small bulk, high value packages

×