It is often said that success depends on \"location! location! and location!\".

Question

It is often said that success depends on "location! location! and location!". It is true to a certain extent in Operations Management, although there are certain factors of special importance depending on the product, the market, the supply chain, etc. Most BMW's you see on the road are produced in Greenville, SC, from the same design as in Bavaria, Germany (BMW = Bavarian Motor Works). The US production beats the high tariffs on imported luxury cars and the supply chain favours the East Coast. Toyota produces on the West Coast for the same reason. The steel industry has been historically in Pittsburgh close to iron ore (Pennsylvania) and coal (West Virginia), plus the advantage of cheap transport by barge to the Three Rivers area (remember Steelers stadium?). Nuclear power plants drink huge quantities of water and have to be located close to large bodies of water, e.g. Three Mile Island, Calvert station on the Maryland Eastern Shore.

Manufacturing industries can locate either close to raw materials, e.g. steel, or close to market, e.g. BMW. Cost is often the deciding factor in location. Revenue generation is the deciding factor for service industries and over 70% of the US economy is service. Your pizza delivery sources from Pizza Hut and Domino's are close to you, the customer, not in Chicago, the base of both pizza corporations. From this perspective, discuss the location of outlet malls at the junctions of major highways, or the locations of restaurants in clusters or near a popular shopping center, e.g. Towsontown center. Mention and discuss the locations of some other businesses, manufacturing, service, or a combination of both.

There are alternate reasons too. The original location of Hollywood was to take advantage of 365 sunny days every year. With advanced studio lighting, computer-generated imagery, etc., this is no longer needed. One alternate reason is the location of Microsoft corporation in Redmond, WA, across the bay from Seattle. This is where Bill Gates grew up, and he built Microsoft from home. What is it about Microsoft that they can be a towering success globally without worrying about supply chain and whatever that determines location for many businesses? What does that imply for Facebook and other online operations, some domestic, some global?

Explanation / Answer

Location plays a very important role especially manufacturing and service firms. In the case of steel, generally located near to iron ore, in the case of nuclear power, generally located near the sea coast, in the case of a retail store, located near consumer, in the case of a hospital, located near to the residential areas. In the case of fast food chains, location plays very important role. Even in banking, the location plays very important role.

In the online world, the location may not play such key role in business success and location related conditions are relaxed for some industries such as Banking, Retailing, IT services etc. Influence of location on business success reduced drastically and is not driven by the location because of the virtual world. Customers are still getting better service.

While setting up a service entity such as IT firms like Microsoft or facebook, stakeholder assessment needs to be done such as Skills availability, proximity to employees, govt. incentives and tax holidays, focus on work-life balance, and proximity to potential customers etc are main factors considered in location decisions. In virtual world, some these factors become irrelevant and some of the factors gains importance such as safety and security of the employees, connectivity (IT infrastructure/road infrastructure etc.)

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