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Figure 8.1
© 2011 Pearson Education, Inc. publishing as Prentice Hall 8-8
Global Competitiveness Index 2010–2011-2012.
Country/Economy 2010 - 2011 2011 - 2012
Switzerland 1 1
Sweden 2 3
Singapore 3 2
United States 4 5
Germany 5 6
Japan 6 9
Finland 7 7
Denmark 9 8
Canada 10 12
United Kingdom 12 10
France 15 18
China 27 26
Spain 42 36
Portugal 46 45
Turkey 61 59
Bulgaria 71 74
$70 $25
= $1.17 per unit = $1.25 per unit
60 units 20 units
Table 8.4
© 2011 Pearson Education, Inc. publishing as Prentice Hall 8 - 18
Locational
Break-Even Analysis
Method of cost-volume analysis used for
industrial locations
Three steps in the method
1. Determine fixed and variable costs for
each location
2. Plot the cost for each location
3. Select location with lowest total cost for
expected production volume
–
$110,000 –
–
–
$80,000 –
–
$60,000 –
–
–
Akron Chicago
$30,000 – lowest
Bowling Green
lowest
– cost
lowest cost
cost
$10,000 –
| | | | | | |
–
0 500 1,000 1,500 2,000 2,500 3,000
Figure 8.2
Volume
© 2011 Pearson Education, Inc. publishing as Prentice Hall 8 - 21
Center-of-Gravity Method
Finds location of a distribution
center that minimizes distribution
costs
Considers
Location of markets
Volume of goods shipped to those
markets
Shipping cost (or distance)
∑diyQi
i
y - coordinate =
∑Qi
i
60 –
30 –
Atlanta (60, 40)
–
| | | | | |
East-West
30 60 90 120 150
Arbitrary
origin
Figure 8.3
© 2011 Pearson Education, Inc. publishing as Prentice Hall 8 - 25
Center-of-Gravity Method
Number of Containers
Store Location Shipped per Month
Chicago (30, 120) 2,000
Pittsburgh (90, 110) 1,000
New York (130, 130) 1,000
Atlanta (60, 40) 2,000
60 –
30 –
Atlanta (60, 40)
–
| | | | | |
East-West
30 60 90 120 150
Arbitrary
origin
Figure 8.3
© 2011 Pearson Education, Inc. publishing as Prentice Hall 8 - 27
Transportation Model
Table 8.6
© 2011 Pearson Education, Inc. publishing as Prentice Hall 8 - 30
Location Strategies
Table 8.6
© 2011 Pearson Education, Inc. publishing as Prentice Hall 8 - 31
Location Strategies
Table 8.6
© 2011 Pearson Education, Inc. publishing as Prentice Hall 8 - 32
How Hotel Chains Select Sites
Location is a strategically important
decision in the hospitality industry
La Quinta started with 35 independent
variables and worked to refine a
regression model to predict profitability
The final model had only four variables
Price of the inn r2 = .51
Median income levels 51% of the
profitability is
State population per inn predicted by
Location of nearby colleges just these four
variables!
© 2011 Pearson Education, Inc. publishing as Prentice Hall 8 - 33
The Call Center Industry
Requires neither face-to-face contact
nor movement of materials
Has very broad location options
Traditional variables are no longer
relevant
Cost and availability of labor may drive
location decisions
Low-wage countries like India with
highly educated, English-speaking work
force have been attractive places for big
U.S. Companies to hire call center staff.
© 2011 Pearson Education, Inc. publishing as Prentice Hall 8 - 34
Geographic Information
Systems (GIS)
Important tool to help in location analysis
Enables more complex demographic
analysis
Available data bases include
Detailed census data
Detailed maps
Utilities
Geographic features
Locations of major services
© 2011 Pearson Education, Inc. publishing as Prentice Hall 8 - 35
Geographic Information
Systems (GIS)