Location strategy for

International business

By:-
Manu Raj Sharma
Roll No-20
Location Strategy
It 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 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.
Need For Location Strategy
 Most organizations recognize that geography is a key driver of corporate
performance.
 Yet many maintain ineffective and inefficient footprints that can hamper talent
attraction and retention, increase operating costs, reduce operating flexibility,
overexpose them to risk, and depress shareholder value.
 Geographic variables such as operating flexibility, talent availability, operating costs,
risk, or tax regulations can change quickly.

“Location decisions are long-term and involve significant financial commitment

and risk, often occurring globally, which makes a sound location strategy a critical
component of a company’s overall business strategy.”
Formulating a location strategy
typically involves the following factors-

 Facilities
 Feasibility
 Logistics
 Labor
 Community and site
 Trade zones
 Political risk
COMPANY REQUIREMENTS -The initial part of
developing a location strategy is determining
what a company will require of its locations.
 Size
 Traffic
 Population
 Total costs
 Infrastructure
 Labor
 Suppliers
LOCATION SELECTION TECHNIQUES
Location strategists often divide assessment of prospective locations into
 Macro analysis
 Micro analysis.

Macro analysis encompasses the evaluation of different regions and

communities.
Micro analysis includes the evaluation of particular sites.
The Main macro analysis are -
 Factor-rating systems,

 Linear Programming,

 Center of gravity.
Factor-rating systems
Factor-rating systems are among the most commonly
used techniques for choosing a location, because they
analyze diverse factors in an easily comprehensible
manner. Factor-rating systems simply consist of a
weighted list of the factors a company considers the
most important and a range of values for each factor. A
company can rate each site with a value from the range
based on the costs and benefits offered by the
alternative locations, and multiply this value by the
appropriate weight. These numbers are then summed
to get an overall "factor rating." Then a company can
compare the overall ratings of alternative sites. This
technique enables a company to choose a location
systematically based on the best rating.
Linear programming
Linear programming provides a method for evaluating
the cost of prospective locations within a
production/distribution network. This technique uses a
matrix of production facilities and warehouses that
shows the unit shipping costs from a manufacturing
location designated by a variable, such as X, to
prospective destinations, such as warehouses
designated by other variables— E, F, and G —and the
total amount of goods the prospective
manufacturer, X, could produce. Other prospective
manufacturing locations and the same information for
each are also included in the matrix. After computing
the total costs for each prospective location, a company
can determine which one has lower total costs in terms
of the entire production/distribution network.
The center of gravity method
This method is useful for identifying an individual
location by considering existing locations, the distances
between them, and the volume of products to be
shipped. Companies use this method mostly for
locating distribution warehouses. To use this technique,
companies plot their existing locations on a grid with a
coordinate system (the particular coordinate system
used does not matter). The idea behind this technique
is to identify the relative distances between locations.
After the existing locations are placed on the grid, the
center of gravity is determined by calculating
the X and Y coordinates that would have the lowest
transportation costs.
Thank You