EVALUATE THE FACTORS WHICH INFLUENCE AN ORGANIZATION'S STRATEGIC PLANNING AND DECISION MAKING PROCESSES IN RELATION TO THE LOCATION OF ITS PRODUCTION/SERVICES FACILITIES

EVALUATE THE FACTORS WHICH INFLUENCE AN ORGANIZATION'S STRATEGIC PLANNING AND DECISION MAKING PROCESSES IN RELATION TO THE LOCATION OF ITS PRODUCTION/SERVICES FACILITIES

For a long time, the issue and subject about the facilities location or FL has been present in different literatures in the field of management. This is because of the fact that it concerns with the different problems, risks and hindrances that are connected with the proper or appropriate ways of deciding about the location of the production and service facilities. Due to this, there are different literatures and studies which focus on introducing methods and models which will help problems that are related with the facilities locations (Canel & Das 2002).

The reason behind this importance is because of the fact that the location of a service operation helps to know how conveniently customers can conduct business with the company Thus, the location of production and service operations can have a great influence towards the investment and operating costs, therefore, it can affect the profits and the price at which goods and services can be offered as some aspects of the production system design. Although, location is considered as a factor of importance, ordinarily many alternative locations can be equally good (Shim & Siegel 1999).

This is important because rational decisions about plan location help to minimize relevant costs. Generally, however, people are thinking of not only operating costs but also costs that are considered as long term. As a result, differences in the operating costs might be compensated for in the longer term by the differences in terms of capital investment (Shim & Siegel 1999).

There are different factors which influence the decisions about the location of the facilities. These factors include the supply of labor, the type of labor needed, the activities involved and connected to labor union, the attitude of the community, the appearance, transportation and accessibility, the availability of the utilities and the availability of recreational facilities (Shim & Siegel 1999).

It is also important to consider the social aspect of the decision, particularly those that are related with the environment. This pertains on the availability of the energy, the cost of energy and the problems connected to pollution.

First, it is important to consider that the types of labor needed and the supply of labor needed, together with the price or cost of labor and other factors related to the manufacturing and service activities and procedures such as energy, transportation and utilities can add up to the cost of the manufacturing and service offerings. On the other hand, some of the important factors related with the environment, particularly the appearance and the reaction of the community is very important because it can affect how the entire organization will be perceived by the greater community. Therefore, the perspectives of the community have impacts towards the image of the organization to be created, which greatly influence the overall operation of the company, particularly the process of connecting with other important stakeholders such as the investors, customers, government etc.

The issue about competition is also important. It is important to consider the different strategies being implemented by the competitors. This is because if the competitor got the more feasible location than the business, then chances are the competitor can offer products and service of high quality and lower price.

On the other hand, there are some researchers which focus on the aspect of globalization process in connection with the facility location. This is because, as of now, more and more business are focusing on jumping to the bandwagon of globalization, which influence them to offer products and services in different parts of the globe. Studies show that companies are already considering manufacturing and service facility locations in other countries in order to maintain competitive advantage, particularly regarding the different factors stated above.

 

There are different factors influence decisions on investing abroad and choosing foreign manufacturing locations. Bass et al. (1977) and Tong and Walter (1980) conducted surveys to identify the factors to be considered in establishing manufacturing facilities in other countries. In addition to these two surveys, several other studies (Haug, 1985; Ferdows, 1989; Cohen et al., 1993; Naik and Chakravarty, 1993; Yip, 1993) outline the following factors as the most common and influential ones:

• labor and other production inputs;
• political stability;
• host government attitudes toward foreign investment;
• host government tax and trade policies;
• proximity to major markets;
• access to transportation; and
• existence of other competitors.

 

 

 

 

 

 

 

 

 

 

 

 

References

Bass, B.M., McGregor, D.W., Walters, J.L. 1977, "Selecting foreign plant sites: economic, social, and political considerations", Academy of Management Journal, Vol. 20 No.4, pp.535-51.

Canel, C & Das, S 2002, ‘Modelling Global Facility Location Decisions: Integrating Marketing and Manufacturing Decisons’, Industrial Management and Data Systems, vol. 102, no. 2, pp. 110 – 118.

Haug, P. (1985), "A multiple-period, mixed integer programming model for multinational facility location", Journal of Management, Vol. 11 No.3, pp.83-96.

Naik, B., Chakravarty, A.K. (1994), "A strategy for locating a network of international manufacturing facilities", Tulane University, New Orleans, LA., Proceedings of the Symposium on Globalization of Technology, Manufacturing and Service Operations, .

Shim, J & Siegel, J 1999, Operations Management, Barron’s Educational Series.

Tong, H.M., Walter, C.K. (1980), "An empirical study of plant location decisions of foreign manufacturing investors in the United States", Columbia Journal of World Business, pp.66-73.