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UNIT 1 (B)

1. Site selection for a business is important as it can reduce costs and impact profitability. Choosing the wrong location can waste large investments. 2. When selecting a site, technical, commercial, and financial factors must be considered to maximize profits. 3. Key factors affecting location include availability of raw materials, proximity to markets and resources, transportation access, labor supply, and land suitability. A careful analysis of costs and qualitative factors is needed to select the best location.

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39 views16 pages

UNIT 1 (B)

1. Site selection for a business is important as it can reduce costs and impact profitability. Choosing the wrong location can waste large investments. 2. When selecting a site, technical, commercial, and financial factors must be considered to maximize profits. 3. Key factors affecting location include availability of raw materials, proximity to markets and resources, transportation access, labor supply, and land suitability. A careful analysis of costs and qualitative factors is needed to select the best location.

Uploaded by

chishtykhalid
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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6/27/2013 Dr.

Chishty

PLANT LOCATION

INTRODUCTION
6/27/2013

Site selection is an important activity as it decides the fate of the business. A good location will reduce the cost of production &distribution to a large extent. The reduction of cost of distribution helps in elevating either the competitive strength or the profit margin of business. Locating of business involves large & relatively permanent investment.
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Dr. Chishty

6/27/2013

If the site selection is not done properly, all the money spent on factory building, machinery & their installation will go in waste & the owner has to suffer great loss. Therefore the site for factory should be selected very carefully. While selecting a site it is necessary to consider technical, commercial, &financial aspects & then select a site that may provide maximum profit.

Dr. Chishty

NEED FOR LOCATION


6/27/2013

While starting a new factory During expansion of existing plant

Dr. Chishty

When existing plant is to be re-located at some other place

STEPS( PROCEDURE) IN CHOOSING LOCATION


6/27/2013

National Decision

Political, social, economic stability; Currency exchange rates; . . . . .

Dr. Chishty

Regional Decision

Climate; Customer concentrations; Degree of unionization; . . . . .

Community Decision

Transportation system availability; Preference of management; . . . . .

Site Decision

Site size/cost; Environmental impact; Zoning restrictions; . . . . .


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PLANT LOCATION
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Meaning-the establishment of an industry at a particular place. It is of 2 types1. Localization /centralization-means concentration of similar type of industries at some particular place. E.g. textile in Mumbai. 2. Delocalization /Decentralization-means spreading of similar type of industries at different places. E.g. banking industries.

Dr. Chishty

FACTORS AFFECTING LOCATION


6/27/2013

1. 2. 3. 4. 5.

6.
7. 8. 9. 10. 11.

Availability of raw material Nearness to the potential market Near to the source of operating requirements like electricity, disposal of waste, drainage facilities. Supply of labor Transport & communication facilities Integration with other group of companies Suitability of land & climate Availability of housing, other amenities & services Local building & planning regulations Safety requirements Others like low interest on loans, special grants, living standards

Dr. Chishty

SELECTION OF THE SITE FOR THE FACTORY


6/27/2013

Known as location analysis where firstly some geographical area is selected & from that area a particular site is selected for the establishment of the plant. Methods for the evaluation of plant location1. Involving quantitative factorsa. Comparative cost chart, b. Dimensional analysis. 2. Comparison of qualitative factors.
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Dr. Chishty

COMPARATIVE COST CHART


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Is appropriate where the location problem concerns the placement of a single plant. This is based on location cost summary chart. A comparative chart of total costs involved in setting up a plant of desired size is prepared.
40 30 20 10 0 locations

Dr. Chishty

A B C D

The total cost is represented by the height of column for each location. we select a location for which total cost is minimum. The cost summary chart has advantage of clarity in presentation. but analysis is restricted to certain specified factors only. Least cost centre analysisHere transportation cost associated with various location alternatives is considered. Limitation of these techniques1.Choice of plant location assumed to be entirely dependent upon minimization of operational costs. 2.Operational costs are assumed to be linearly related to distance involved.

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6/27/2013 Dr. Chishty

DIMENSIONAL ANALYSIS
6/27/2013

It involves 1. calculation of the relative merits or cost ratios for each of the factors, 2. giving each of the cost factor an appropriate weightage by means of an index to which the cost ratio is raised & 3. multiplying these weighted ratios in order to arrive at a figure on the relative merits of alternative sites.

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Dr. Chishty

Let Cm1,Cm2,Cm3,..Cmz are the costs associated with site M for various cost factors. Cn1,Cn2,Cn3,.Cnz are of site N. W1,W2,W3,.Wz are weightage for various factors. Merit of location M=(Cm1)W1*(Cm2)W2*(Cmz)Wz Merit of location N=(Cn1)W1*(Cn2)W2*(Cnz)Wz Relative merits of sites M & N aremerit of M merit of N If this value is > 1, then select site M & vice-versa. Advantages- it compares both subjective & objective factors & gives a quantitative figure.

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6/27/2013 Dr. Chishty

COMPARISON OF QUALITATIVE FACTORS

These are the factors to which cost values cant assigned. Like lack of good schools, community attitude. These can be termed as good or excellent.

6/27/2013 Dr. Chishty

factors labor relation

Location A adequate good

Location B excellent Very good

education

Good

Very good
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Clearly location B appears to be better one.

RANKING & WEIGHT METHOD


6/27/2013

1.

2.

3. 4.

5.

Various locations are ranked acc. To their contribution Various factors are assigned weights acc. To their importance Weights are then multiplied with rank assigned Total of these products for each location is calculated Location having max. total is then selected.

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Dr. Chishty

ADVANTAGES &DISADVANTAGES OF URBAN, RURAL & SUB-URBAN SITES FOR A PLANT6/27/2013

urban Better transportation Large labor supply Big local market Easy finance Municipal services Better civil attitude

rural More water


Cheaper land Lower taxes Few ordinances Lack of skilled

Sub-urban Planned industrial


Larger area Labor stability

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Dr. Chishty

RECENT TRENDS IN THE LOCATION OF INDUSTRY


6/27/2013

Priority for sub-urban areas Industrial development in notified backward areas Establishment of Industrial estate Decentralization of industries Increased role of government in the decision of location of industries Competition between Government & Industries

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