TOPIC : LOCATION

OBJECTIVE : In lesson : to understand the

reasons for choosing a specific location

REMEMBER FROM EARLIER CONVERSATIONS THAT ALL FIRMS ARE PRODUCERS, HOWEVER SOME ASPECTS OF THE ‘OPERATIONS

MANAGEMENT’ TOPIC ARE ONLY RELEVANT TO MANUFACTURING FIRMS.

We have done…

How to produce [batch, job, cell, flow]

Now we will do…..

Where to produce [location]

Manufacturing districts

Manufacturing in China

Manufacturing in South Africa

Manufacturing in Silicon

Valley, USA

There are generally considered to be 9 factors that will affect the

location decision.

NOT every factor will be relevant to very decision.

Deciding which are the important factors to the given Case Study is a Level 2 skill

For example if you are choosing between Metapan and San Salvador – factors 3,6,7&8 might be the vital

ones

For example if you are choosing between Mexico and Venezuela – factors 1,2,7&9 might be the vital ones

So what are the 9 factors [p365-368 Loykie]

TASKIn pairs you will be given TWO FACTORS

Explain them both ie how they might affect a business location using specific examples

An example of a ‘specific example’Given – 1/ Suppliers & 2/ Land

SUPPLIERS- Firms may wish to locate close to their suppliers, especially if they operate Just In Time systems &/or their stocks are fragile and vulnerable to damage or decay. Eg …..

LAND - In some instances the actual quality / type of land is vital to the business itself. Particularly true in the agricultural sector (coffee grows best in high , cool environment etc) – and also in the tourist industry, surf resorts locate close to waves, ski resorts locate close to snow etc

BOEING & CHICAGO

1. Identify 2 factors that led to Boeing relocating to Chicago [2 marks]

2. Explain how the move might be a ‘strategic decision’ by Boeing [6 marks]

3. Discuss the likelihood of the move being a success for the firm in the future [6]

1. Identify 2 factors that led to Boeing relocating to Chicago [2 marks]

2. Explain how the move might be a ‘strategic decision’ by Boeing [6 marks]

3. Discuss the likelihood of the move being a success for the firm in the future [6]

CHICAGO

1.Identify 2 factors that led to Boeing relocating to Chicago [2 marks]

1.Identify 2 factors that led to Boeing relocating to Chicago [2 marks]

“Tax breaks and other incentives : that could total $60 million over 20 years.”

“Tax breaks and other incentives : that could total $60 million over 20 years.” 1 mark for each factor

It is a ‘strategic decision’ because it might not necessarily be a cost efficient one. Certainly not in the short term, though 50% cut in staff should be more leaner in the long term. So if ‘saving cost’ is not the main reason for doing it, then why are they doing it? Because of what their strategy as a firm is. Their strategy is growth, across all their divisions. Their main divisions are aircraft, military and satellite : they currently have their aircraft manufacturing base in Seattle – and to have their headquarters their too might give a sense that the firm is prioritizing this division – this may effect customers of contract for military and satellite who might consider them not to be serious about these 2 divisions. So to avoid this, their strategy is to move their headquarters out of Seattle, to a more ‘neutral’ location. This should lead to a growth in their military & satellite divisions

It is a ‘strategic decision’ because it might not necessarily be a cost efficient one. Certainly not in the short term, though 50% cut in staff should be more leaner in the long term. So if ‘saving cost’ is not the main reason for doing it, then why are they doing it? Because of what their strategy as a firm is. Their strategy is growth, across all their divisions. Their main divisions are aircraft, military and satellite : they currently have their aircraft manufacturing base in Seattle – and to have their headquarters their too might give a sense that the firm is prioritizing this division – this may effect customers of contract for military and satellite who might consider them not to be serious about these 2 divisions. So to avoid this, their strategy is to move their headquarters out of Seattle, to a more ‘neutral’ location. This should lead to a growth in their military & satellite divisions

2. Explain how the move might be a ‘strategic decision’ by Boeing [6 marks]2. Explain how the move might be a ‘strategic decision’ by Boeing [6 marks]

1 mark (Level 1) what is a strategic decision3 marks, a clear explanations + with direct examples linked to the Case Study, 2 marks

3. Discuss the likelihood of the move being a success for the firm in the future [8] 3. Discuss the likelihood of the move being a success for the firm in the future [8]

Success is not always easy to measure, the same can be said of growth, as size can be measured by a variety of criteria (eg sales, profit, employees etc)Success is not always easy to measure, the same can be said of growth, as size can be measured by a variety of criteria (eg sales, profit, employees etc)

Reasons suggesting success : there are significant financial incentives being offered by the State, and on top of that the staffing costs will be cut in half at their headquarters. It is to become more lean. Financially this looks positive. It will also hopefully send out a strong message to potential clients in the military and satelite markets that they are full committed, equally, to all divisions, no prioritizing one over the other. This could lead to winning important contracts especially as Boeing already has a powerful brand reputation.

Reasons suggesting success : there are significant financial incentives being offered by the State, and on top of that the staffing costs will be cut in half at their headquarters. It is to become more lean. Financially this looks positive. It will also hopefully send out a strong message to potential clients in the military and satelite markets that they are full committed, equally, to all divisions, no prioritizing one over the other. This could lead to winning important contracts especially as Boeing already has a powerful brand reputation.

Reasons causing concern : the move has lead to the need to ‘absorb’ certain workers into other divisions, this could mean moving them out of their area of expertise and there will be an induction period where performance is low. Unions are concerned, and although there is no suggestion of a Industrial action, this could change. There is also the possibility that as they focus on growth and new markets , and showing the market they are diversified, they might take their eye off the ball in Seattle and their core product, aircrafts could suffer.

Reasons causing concern : the move has lead to the need to ‘absorb’ certain workers into other divisions, this could mean moving them out of their area of expertise and there will be an induction period where performance is low. Unions are concerned, and although there is no suggestion of a Industrial action, this could change. There is also the possibility that as they focus on growth and new markets , and showing the market they are diversified, they might take their eye off the ball in Seattle and their core product, aircrafts could suffer.

Overall i would imagine this will lead to success, we now it been a thoughtful process (taken 9 months to confirm) and if they can continue with employee participation then the Unoin should be happy and unhindered growth can occur.

Overall i would imagine this will lead to success, we now it been a thoughtful process (taken 9 months to confirm) and if they can continue with employee participation then the Unoin should be happy and unhindered growth can occur.

AS A GROUP WE WILL PICK A BUSINESS (OTHER THAN RESTAURANTS) & THEN IN PAIRS SELECT A LOCATION IN ES – JUSTIFYING YOUR CHOICE.