8.5

• The general procedure for making location decisions usually consists of the following steps: 1. Decide on the criteria to use for evaluating location alternatives, such as increased revenues, decreased cost, or community service. 2. Identify important factors, such as location of markets or raw materials. The factors will differ depending on the type of facility. 3. Develop location alternatives 4. Evaluate the alternatives and make a selection
• Develop location alternatives a. Identify a country or countries for location. b. Identify the general region for a location. c. Identify a small number of community alternatives. d. Identify site alternatives among the community alternatives.
• Transfer pricing rules that allow U.S. companies to establish a price for transfer into the United States that keeps most of the profit in the foreign subsidiary. Those earnings are not subject to U.S. taxes unless or until they are returned as

  dividends to the U.S. parent corporation.
• Factors relating to foreign locations: government, cultural differences, customer preferences, labor, safety, resources, financial, technological, market, financial.
• Identifying a Region: location of raw materials, labor factors, and location of market, other factors
• procedure is used to develop a factor rating: Determine which factors are relevant, Assign a weight to each factor that indicates its relative importance, Decide on a common scale for all factors, Score each location alternative, Multiply the factor weight by the score for each factor, Choose the alternative that has the highest composite score
• If raw materials are involved, the transportation cost must be converted into cost per unit of output in order to correspond to other variable costs.
• transportation model of linear programming It is a special-purpose algorithm used to determine the minimum transportation cost that would result if a potential new location were to be added to an existing system
• Locational cost-profit-volume analysis assumes: Fixed costs are constant for the range of probable output, Variable costs are linear for the range of probable output, Only one product is involved, The required level of output can be closely estimated.
• evaluating location alternatives: locational cost-profit-volume analysis, factor rating, and the center of gravity method
• Locational cost-profit-volume analysis Technique for evaluating location choices in economic terms.
• What are the potential sales to be realized from each potential solution? Question for Locations
• How can sales, market share, and profit be optimized for the entire set of locations? Question for Locations
• What are the potential sales to be realized from each potential solution? Question for Locations
• Emergency services use a GIS to allocate resources to locations to provide adequate coverage where they are needed.
• Utility companies use a GIS to balance supply and demand, and identify problem areas.
• Insurance companies use a GIS to determine premiums based on population distribution, crime figures, and likelihood of natural disasters such as flooding in various locations, and to manage risk.
• Retailers are able to link information about sales, customers, and demographics to geographic locations in planning locations.
• Banks use a GIS to help decide where to locate branch banks and to understand the composition and needs of different market segments
• Publishers of magazines and newspapers use a GIS to analyze circulation and attract advertisers
• Logistics companies use GIS data to plan fleet activities such as routes and schedules based on the locations of their custome
• Multiple plant manufacturing strategies: product plant strategy, market area plant strategy, process plant strategy, general purpose plant strategy
• Product plant strategy With this strategy, entire products or product lines are produced in separate plants, and each plant usually supplies the entire domestic market.
• Market area plant strategy With this strategy, plants are designed to serve a particular geographic segment of a market (e.g., the West Coast, the Northeast). Individual plants pro- duce most if not all of a company’s products and supply a limited geographical area.
• Enumerate evaluating location alternatives

  locational cost-profit-volume analysis, factor rating, and the center of gravity method
• Locational cost-profit-volume analysis assumes:

  Fixed costs are constant for the range of probable output