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Visit the websites of three major organizations in your region. Find out where their facilities are located. Explain some factors which should be considered while evaluating location options for a facility because globalization has made consumers expect the best products at the lowest prices irrespective of where they are produced. Companies are under competitive pressure to engage in global production and service operations due to the rapid growth of global markets.
Facility location may be understood as the function of determining where the plant should be located for maximum operating economy and effectiveness. A selection on pure economic basis will ensure an easy a regular supply of raw materials, labor force, efficient plant layout, proper utilization of productioncapacity and reduced cost of production. A bad location on the other hand is a severe handicap for any enterprise and it finally bankrupts it. It is therefore very essential that utmost care should be exercised in the initial stages to select a proper place. Once a mistake is made in locating a plant it becomes extremely difficult and costly to correct it, especially where large plants are concerned.
An entrepreneur seeking location for his/her enterprise has greater freedom than in the past. How difficult the task of selecting the location in the past was is better explained by narrating the ordeal that was going through by the founders of the great Tata Iron & Steel Company (TISCO). The site (present Jamshedpur) was selected after extensive geological survey which established the existence of oil, iron ore and other minerals. The site selected was at the confluence of two small rivers amidst thick jungle. Between the two rivers, a city had to be planned. As the jungles were cleared, in place of towering trees, steel chimneys arose.
Though the maharaja of mayurbhanj had given highly favorable terms to Tatas, the local kings of the jungle were less hospitable. Tigers killed two tribal laborers. An elephant driven frantic by the din of dam construction stampeded over a number of huts a flattened them. Erecting a plant of this nature in the wilderness was called by contemporaries "a titanic enterprise". Communications were slow, machinery was hauled over vast distances from home and abroad; labor had to be trained.
That was at the beginning of the 20th century. Now we are in the 21st century. The passage of time has made site selection easier for contemporary businessmen, thanks to certain specific developments that have taken place over a period of nine decades. Following are the developments;
improvements in transportation and communication faclities and speed of services
reduction in wage differentials between regions
mobility of workers and management
improvements in construction methods and designs for plant buildings which make them less expensive to build
vigorous policy pursued by the government to remove regional imbalances in industrial development thus making all regions almost equal in attraction
improvements in processing and machine designs that reduce the relative number of employees required for a given output
Availability of air conditioning equipment to counteract adverse climatic conditions for employees and processes.
Expansion of markets for almost all goods and services so that more enterprises are needed to meet the demands.
ERRORS IN SELECTION:
Though location election is relatively easy, businessman commit errors and wrong locations are selected. Interestingly, error in site election seems to fall into a pattern. Some of the most common errors are;
Lack of thorough investigation and consideration of factors involved.
Personal likes and prejudices of key executives or owners overriding impartially established facts.
reluctance of key executives to move from traditional established home ground to new and better locations
Moving to congested areas already and about to be over industrialized.
Choice of community with low cultural and educational standards, so that key administrative and technical personnel eventually accept employment elsewhere.
FACTORS TO BE CONSIDERED WHILE SELECTING A LOCATION:
1. within the country or outside.
The first step in plant location is to decide whether the facility should be located domestically or internationally. A few years ago, this factor would have received little consideration. But with increasinginternationalization of business, the issue of home or foreign country is gaining greater relevance. If the management decides on foreign location, the next logical step would be to decide upon a particular country for location. This is necessary because, countries across the world are vying with each other to attract foreign investments. The choice of a particular country depends on such factor as political stability, export and import quotas, currency and exchange rates, cultural and economic peculiarities, and natural or physical conditions.
2. Selection of region
Following factors influence such selection:
Availability of raw materials:
As a manufacturing unit is engaged in the conversion of raw materials into finished products, it is very essential that it should be located in a place where the supply of raw materials is assured at minimum transport cost. The heavy concentration of sugar industry in Bihar and UttarPradesh is due to the fact that the two states are the leading producers of sugarcane in the country. Similarly, the steel industry is concentrated in Bihar, west Bengal,Orissa and MadhyaPradesh because of the availability of raw materials in these states.
Nearness to raw materials offer advantages such as reduced cost of transportation, regular and proper supply of materials uninterrupted by transportation breakdowns and savings in the cost of storage of raw materials.
Nearness to the market:
Since goods are produced for sale, it is very essential that the factory should be located near the market. a reduction in the cost of transporting finished goods to the market; the ability to adjust the production programmer to suit the likes and dislikes of consumers; the ability to render prompt service to the consumers, provide after-sale services, and execute replacement orders without delay-these aresome advantages that accrue to the entrepreneur if he/she establishes his/her factory near his market. Industries using pure or non-weight-losing raw materials, industries producing perishable or bulky products and servicing units tend to be located near their market. to be specific, pesticides and insecticides manufacturing concerns, auto-servicing and repairing units, tire retreading concerns, concerns manufacturing wooed accessories for electrical wiring, distilled water concerns and hosiery units, must be located near their market.
Availability of power:
Power is essential to move the wheels of an industry. Coal, electricity, oil and natural gas are the sources of power. Where coal is the source of power, as in thecase of the iron and steel industry, the factory has to be located near the coal fields.Examples of such industries are the iron and steel industry in Germany. Industries using electricity have to be located at a place where electric power is available regularly and at cheap rates. Thealuminum extraction plant and a semi mechanizedbarky have to be located in places where electric power is cheaply available in plenty. Electricity as a source of power has become very significant in modern industries because of ease in handling, its cleanliness, flexibility and cheapness. In fact, its emergence as a source of power has reduced the importance of coal as a natural factor influencing plant location. Similarly, huge pipelines traversing long distance have kept up oil supplies to industries located in different regions.
While making a study of location, an entrepreneur considers the question of the availability of transport facilities. Transport facilities are essential for bringing raw materials and men to the factory for carrying the finished products from the factory to the market. A place which is well connected rail, road and water transport is ideal for plant location.
The influence of government policies and programmers on plant location is apparent in very country, particularly in planned economies like ours. In the name of balanced regional development, many backward regions in India have been selected for the location of new industries, which would generate the region's economy and on a larger canvas, the national economy. Thegovernment of India has been influencing plant location in a number of ways. Some of these are;
freight rate policy
establishing a unit in the public sector in a remote area and developing it to attract other industries
institutional finance and government subsidies
Competition between states:
States vie with each other to attract new industries. Varioustats offer investment subsidies and state tax exemptions to new units. The incentives may not be of big help to big sized plants. But for small and medium sized plants the incentives do matter. Theowner of these plants certainly considers incentive in selection of region.
3. Selection of community
Availability of labor:
Despite the talk of mechanization and automation, the importance of labor on the industrial side has not been completely lost. Labor is an important factor in the production of goods. An adequacy of laborsupply at reasonable wages is very essential for the smooth and successful working of an organization. The development of the plantation industry in India has been due to, among other things, the availability of adequate labor at cheap rates. Thelabor required may be skilled or unskilled. It is skilled labor which influences plant location because unskilled labor is supposed to be available everywhere, especially in our country.
Civic amenities for workers:
Besides good working conditions inside the factory, the employees require certain facilities outside it. Recreationfacilities, such as clubs, theatres and parks, must be provided for the employees. They require schools for their children a place which abounds in all these facilities will naturally be preferred to other places which lack them. However, if the facilities are not available at a particular place, and if that place is advantageous in other respects, the management should provide such facilities, as has been done in modern townships at Rourkela, chotta Nagpur etc. but this entails the diversion of funds from more productive purpose to less productive purposes.
Finance and research facilities:
Adequate capital is essential for the successful working of any working of any organization. A place where facilities for raising capital are available attracts new industries. This is particularly true in developing countries, where capital is not uniformly available throughout country. Inadvanced countries, case is different because in such countries capital is distributed uniformly.
Local taxes and restrictions:
Local authorities collect charges for the supply of water, electricity and other facilities. They also collect various taxes from industrial units. They impose restrictions on the location of new units in the public interest. It is natural, therefore, for industrialists to prefer an area where such taxes and restrictions are the latest irksome.
4. Selection of the site:
Soil, size and topography:
For factories producing engineering goods, the fertility or otherwise of the soil may not be a factor influencing plant location. But for agro-based industries, fertile soil is necessary for ensuring a strategic plant location. The area of the land should be such as to accommodate not only the existing manufacturing facilities, but offer cope for future expansion programmers as well. Besides the area, the cost of land deserves consideration. If the land is to be purchased, and if the place enjoys all the facilities for plant location, its price should not affect the decision to locate the plant in that particular place, because the cost of land forms a small percentage of the total fixed investment.
Disposal of waste:
The problem of the disposal of waste is common to many industries, particularly, chemical, sugar, steel and leather etc. the site selected for the plant should have provision for the disposal of waste. There must be enough vacant land for the dumping of solid waste.
Companies which take care of plant or facility location are fast food giants like:
McDonald is leading the fast food market for decades, boasting one of the U.S.'s most famous brand, Product and mascots.McDonald's began its franchise operations in 1955, and it has more than 33000 locations across the world.
McDonald's is known around the world for its burgers, fries and shakes
The first requirement for a McDonald's location is 50000 square feet place although locations have been started on a smaller sites also. Food preparation, and strore area should be safe.
There should be a place for proper seating arrangement and subjected to safety and health management. Drive through location must meet traffic and safety requirements. Additional space is required at which franchise can decide to have McDonald's play place. Proper parking should be provided to the customers.
McDonald's location are basically established in urban areas and now a days they are moving towards suburban areas.
In urban areas standard of living is high so people living in cities prefer fast foods. So, McDonald has a good customer base in cities. Skilled and well educated customers are required to deal with the people. Which is not a big task in cities as in cities education level of people is high.
Generally , McDonald's are located in shopping complexes or malls as a huge no. of people come there for shopping or just for a enjoying purpose. In urban areas electricity is available 24*7 which is needed to preserve the food products especially in summers.
Big Bazaar was launched in September, 2001 with the opening of its first four stores inÂ Calcutta,Â Indore,Â BangaloreÂ andÂ HyderabadÂ in 22 days. Within a span of ten years, there are now 161 Big Bazaar stores in 90 cities and towns across India. By September 2012 BIG BAZAAR will have two more stores in North east namely SILCHAR and JORHAT in Assam.
Big bazar is known as the Wal-Mart of India
Mainly Big Bazaar is located inside mall. It is a chain of hypermarket offering wide range of merchandise, fashion and apparels, food products, general merchandise, furniture, electronics, books, fast food and leisure and entertainment sections.
Â A typical Big Bazaar is spread across around 50,000 square feet (4,600Â m2) of retail space. While the larger metropolises have Big Bazaar Family centres measuring between 75,000 square feet (7,000Â m2) and 160,000 square feet (15,000Â m2), Big Bazaar Express stores in smaller towns measure around 30,000 square feet (2,800Â m2).
Big bazar is situated in urban as well as sub urban areas as it offers product at a lower rate than other brands.it is situated inside the malls. Malls itself provides good parking services which eases off the parking problem on behalf of big bazar stores. So it is one of the benfits of opening the stores inside malls. Better electricity services, huge no. of customers visit malls. These are some benefits of having big bazaar stores in malls.
In urban and suburban areas good transportation facilities are available so the goods can be transported easily to the stores.
Mother Dairy was set up in 1974.it has a market share of 66% in Delhi -NCR.
Mother dairy has its outlets in Delhi-NCR, Mumbai, Saurashtra, and Hyderabad.
The main reason of high market share in Delhi is that people here live in urban style. People can't even think of having their own cattle for milk. So they are totally dependent on dairy product.
Daily 79 tankers bring milk from the regional collection centre and there are more than 820 outlets in Delhi - NCR. One more reason for the success of mother dairy outlets is better communication and network of roads.