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Industrial area

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This document discusses why location is important for firms and industries. It notes that location decisions are influenced by geographical, economic, environmental and other factors. Key location factors include land, transportation, availability of raw materials, proximity to markets, and labor. The document presents a qualitative approach for firms to evaluate and score potential locations based on weighted factors to determine the optimal location. It provides an example of using this approach to compare two potential locations.

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BY: P.KRISHNA DUTT - 131109025 ALOK KUMAR TRIPATHI - 131109037 1
WHY IS LOCATION SO IMPORTANT.? TO MAXIMIZE THE BENEFIT OF FIRM; IN TERMS OF GEOGRAPHICAL ASPECT, , ECONOMICAL ASPECT, ENVIRONMENTAL ASPECTS ETC TO MAXIMIZE THE PROFIT TO THE CAPITALIST. TO DECREASE THE COST OF THE PRODUCT. TO SUSTAIN AND INCREASE GROWTH OF THE INDUSTRY. 2
LAND. TRANSPORTATION. ENVIRONMENTAL. LEGAL ASPECTS. AVAILABILITY OF THE RAW MATERIALS. PROXIMITY TO THE MARKET. LABOUR FACTORS SITE RELATED FACTORS 3
4 LOCATION, LOCATION, LOCATION! IN CASE OF INDUSTRIAL ,LOCATION DECISIONS ARE EITHER DEMAND-PULLED, SUPPLY-PUSHED, OR MORE FREQUENTLY, BOTH DEMAND-PULLED AND SUPPLY PUSHED. DEMAND-PULLED/PUSHED: MARKET-RELATED FACTORS SUCH AS THE LOCATION OF CUSTOMERS, THE LOCATION OF THE COMPETITION, PURCHASING POWER OF THE CUSTOMER, ROOM FOR EXPANSION PLAYS A KEY ROLE IN DECIDING A LOCATION . INDUSTRIES ARE LIKELY LOCATED IN THE AREAS WHICH HAS MOST POTENTIAL MARKET.
SUPPLY-PUSHED LOCATION FACTORS BASED ON THE COST OF DOING BUSINESS. THE COST OF DOING BUSINESS MAY BE TANGIBLE OR INTANGIBLE. TANGIBLE COSTS INCLUDE THE COST OF SITE AND CONSTRUCTION, THE AVAILABILITY AND COSTS OF LABOR, TRANSPORTATION COST , UTILITIES, TAXES, AND REAL ESTATE COSTS. INTANGIBLE COSTS INCLUDE: ZONING AND LEGAL REGULATIONS, COMMUNITY ATTITUDES, PROXIMITY TO PARENT COMPANYS FACILITIES, EXPANSION POTENTIAL, LABOR CLIMATE, TRAINING AND EMPLOYMENT SERVICES, AND THE QUALITY OF LIFE 5
Qualitative approach for choosing a location for the firm. 6
7 1. DEVELOP A CHECKLIST OF RELEVANT FACTORS 2. ASSIGN WEIGHT TO EACH FACTOR TO INDICATE ITS RELATIVE IMPORTANCE (TOTAL = 100%) 3. ASSIGN A COMMON SCALE TO EACH FACTOR (E.G., 1-5, 5=BEST), AND DESIGNATE ANY MINIMUM 4. SCORE EACH POTENTIAL LOCATION ACCORDING TO THE DESIGNATED SCALE, AND MULTIPLY THE SCORES BY THE WEIGHTS 5. TOTAL THE POINTS FOR EACH LOCATION, AND CHOOSE THE LOCATION WITH THE MAXIMUM POINTS
8 Location Factors Weight Rating Weighted Score Availability of raw materials 25 4 100 Land and construction costs 20 5 100 Distance from market 20 4 80 Transport facility 15 3 45 Skilled labour 10 1 10 Govt. incentives and other factors 10 3 30 Total location score = 365 WHICH OF THESE LOCATIONS IS BETTER? Location Factors Weight Rating Weighted Score Availability of raw materials 25 4 100 Land and construction costs 20 3 60 Distance from market 20 3 60 Transport facility 15 4 60 Skilled labour 10 1 10 Govt. incentives and other factors 10 5 50 Total location score = 340
THANK U.. HOPE U HAVE ENJOYED IT. 9

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Industrial area

  • 1. BY: P.KRISHNA DUTT - 131109025 ALOK KUMAR TRIPATHI - 131109037 1
  • 2. WHY IS LOCATION SO IMPORTANT.? TO MAXIMIZE THE BENEFIT OF FIRM; IN TERMS OF GEOGRAPHICAL ASPECT, , ECONOMICAL ASPECT, ENVIRONMENTAL ASPECTS ETC TO MAXIMIZE THE PROFIT TO THE CAPITALIST. TO DECREASE THE COST OF THE PRODUCT. TO SUSTAIN AND INCREASE GROWTH OF THE INDUSTRY. 2
  • 3. LAND. TRANSPORTATION. ENVIRONMENTAL. LEGAL ASPECTS. AVAILABILITY OF THE RAW MATERIALS. PROXIMITY TO THE MARKET. LABOUR FACTORS SITE RELATED FACTORS 3
  • 4. 4 LOCATION, LOCATION, LOCATION! IN CASE OF INDUSTRIAL ,LOCATION DECISIONS ARE EITHER DEMAND-PULLED, SUPPLY-PUSHED, OR MORE FREQUENTLY, BOTH DEMAND-PULLED AND SUPPLY PUSHED. DEMAND-PULLED/PUSHED: MARKET-RELATED FACTORS SUCH AS THE LOCATION OF CUSTOMERS, THE LOCATION OF THE COMPETITION, PURCHASING POWER OF THE CUSTOMER, ROOM FOR EXPANSION PLAYS A KEY ROLE IN DECIDING A LOCATION . INDUSTRIES ARE LIKELY LOCATED IN THE AREAS WHICH HAS MOST POTENTIAL MARKET.
  • 5. SUPPLY-PUSHED LOCATION FACTORS BASED ON THE COST OF DOING BUSINESS. THE COST OF DOING BUSINESS MAY BE TANGIBLE OR INTANGIBLE. TANGIBLE COSTS INCLUDE THE COST OF SITE AND CONSTRUCTION, THE AVAILABILITY AND COSTS OF LABOR, TRANSPORTATION COST , UTILITIES, TAXES, AND REAL ESTATE COSTS. INTANGIBLE COSTS INCLUDE: ZONING AND LEGAL REGULATIONS, COMMUNITY ATTITUDES, PROXIMITY TO PARENT COMPANYS FACILITIES, EXPANSION POTENTIAL, LABOR CLIMATE, TRAINING AND EMPLOYMENT SERVICES, AND THE QUALITY OF LIFE 5
  • 6. Qualitative approach for choosing a location for the firm. 6
  • 7. 7 1. DEVELOP A CHECKLIST OF RELEVANT FACTORS 2. ASSIGN WEIGHT TO EACH FACTOR TO INDICATE ITS RELATIVE IMPORTANCE (TOTAL = 100%) 3. ASSIGN A COMMON SCALE TO EACH FACTOR (E.G., 1-5, 5=BEST), AND DESIGNATE ANY MINIMUM 4. SCORE EACH POTENTIAL LOCATION ACCORDING TO THE DESIGNATED SCALE, AND MULTIPLY THE SCORES BY THE WEIGHTS 5. TOTAL THE POINTS FOR EACH LOCATION, AND CHOOSE THE LOCATION WITH THE MAXIMUM POINTS
  • 8. 8 Location Factors Weight Rating Weighted Score Availability of raw materials 25 4 100 Land and construction costs 20 5 100 Distance from market 20 4 80 Transport facility 15 3 45 Skilled labour 10 1 10 Govt. incentives and other factors 10 3 30 Total location score = 365 WHICH OF THESE LOCATIONS IS BETTER? Location Factors Weight Rating Weighted Score Availability of raw materials 25 4 100 Land and construction costs 20 3 60 Distance from market 20 3 60 Transport facility 15 4 60 Skilled labour 10 1 10 Govt. incentives and other factors 10 5 50 Total location score = 340
  • 9. THANK U.. HOPE U HAVE ENJOYED IT. 9

Editor's Notes

  • #6: transportation cost (proximity to suppliers and markets), utilities (availability and costs), real estate (site acquisition, preparation and construction) costs. the quality of life (schools and churches, recreation and cultural attractions, amount and type of housing available)