Facilities Location Strategies

A location strategy is a plan for obtaining the optimal location for a company by
identifying company needs and objectives, and searching for locations with
offerings that are compatible with these needs and objectives. A
company's location strategy should conform with, and be part of, its overall
corporate strategy.
Being in the right location is a key ingredient in a business's success. If a company
selects the wrong location, it may have adequate access to customers, workers,
transportation, materials, and so on. Consequently, location often plays a
significant role in a company's profit and overall success. A location strategy is a
plan for obtaining the optimal location for a company by identifying company
needs and objectives, and searching for locations with offerings that are
compatible with these needs and objectives. Generally, this means the firm will
attempt to maximize opportunity while minimizing costs and risks.
A company's location strategy should conform with, and be part of, its overall
corporate strategy. Hence, if a company strives to become a global leader in
telecommunications equipment, for example, it must consider establishing plants
and warehouses in regions that are consistent with its strategy and that are
optimally located to serve its global customers. A company's executives and
managers often develop location strategies, but they may select consultants (or
economic development groups) to undertake the task of developing a location
strategy, or at least to assist in the process, especially if they have little experience
in selecting locations.

Formulating a location strategy typically involves the following factors:

1. Facilities. Facilities planning involves determining what kind of space a

company will need given its short-term and long-term goals.
2. Feasibility. Feasibility analysis is an assessment of the different operating
costs and other factors associated with different locations.
3. Logistics. Logistics evaluation is the appraisal of the transportation options
and costs for the prospective manufacturing and warehousing facilities.
4. Labor. Labor analysis determines whether prospective locations can meet a
company's labor needs given its short-term and long-term goals.
5. Community and site. Community and site evaluation involves examining
whether a company and a prospective community and site will be
compatible in the long-term.
6. Trade zones. Companies may want to consider the benefits offered by free-
trade zones, which are closed facilities monitored by customs services where
goods can be brought without the usual customs requirements. The United
States has about 170 free-trade zones and other countries have them as
well.
7. Political risk. Companies considering expanding into other countries must
take political risk into consideration when developing a location strategy.
Since some countries have unstable political environments, companies must
be prepared for upheaval and turmoil if they plan long-term operations in
such countries.
8. Governmental regulation. Companies also may face government barriers and
heavy restrictions and regulation if they intend to expand into other
countries. Therefore, companies must examine governmental—as well as
cultural—obstacles in other countries when developing location strategies.
9. Environmental regulation. Companies should consider the
various environmental regulations that might affect their operations in
different locations. Environmental regulation also may have an impact on
the relationship between a company and the community around a
prospective location.
10.Incentives. Incentive negotiation is the process by which a company and a
community negotiate property and any benefits the company will receive,
such as tax breaks. Incentives may place a significant role in a company's
selection of a site.