Location Decisions Essay

Deciding on the best location for a new business or relocating an existing genius is often crucial to its success. kettle of fish decisions choosing new sites for expansion or relocation of the business argon some of the most important decisions made by management teams. Selecting the best site exit have a significant effect on many departments of the business and, ultimately, on the profitability and chances of success of the whole firm. Location decisions have three give away characteristics They are strategic in nature as they are long term and have an impact on the whole business.They are difficult to regression if an error of judgment is made due to the be of relocation.They are taken at the highest management levels and are not delegated to subordinates.An optimal location decision is one that selects the best site for expansion of the business or for its relocation, given current information. This best site should maximize the long-term profits of the business. The optim al site is virtually always a compromise between conflicting benefits and drawbacks. For exampleA well-positioned high-street shop provide have the potential for high sales but will have higher rental charges than a similar sized shop out of town. A doery location which is cheap to purchase due to its withdrawnness from major towns might have problems recruiting staff due to lack of a large and trained working population.So an optimal location is likely to be a compromise one that balanceshigh fixed costs of the site and buildings with convenience for customers and potential sales revenue the low costs of a irrelevant site with limited supply of suitably qualified labor quantitative factors with qualitative onesFactors influencing location decisionsSite and other capital costs such as building or shop-fitting costs These vary greatly from region to region within a country and between countries. The best office and retail sites whitethorn be so expensive that the cost of them is beyond the resources of all but the largest companies. The cost of building on a Greenfield site one that has never previously been developed must be compared with the costs of adapting existing buildings on a developed site. Labor costsThe relative importance of these as a locational factor depends on whether the business is capital or labor intensive. An insurance company call center will need many staff, but the labor costs of a nuclear power station will be a very small proportion of its total costs. The attraction of much lower engage rates overseas has encouraged many European businesses to set up operations in other countries for example, bank and Insurance Company call centers. disco biscuit costsBusinesses that use heavy and bulky raw materials such as steel making will incur high transport costs if suppliers are at a great distance from the steel plant. Goods that increase in bulk during production will, traditionally, reduce transport costs by locating penny-pinchin g to the market.