Reference no: EM131681015

Selecting a facility location is becoming much more complex with globalization. One approach to selecting a country is to identify what the parent organization believes are key success factors needed to achieve competitive advantage. Productivity differences among locations (which may be due to system or infrastructure factors, or possibly differences in the workers themselves) need to be considered when comparing costs.

Globalization has added options, but with more options comes a more complicated decision process. Location decisions are typically long-term in nature and can have a huge impact on both revenue and cost.

Most location decisions induce a long-term resource commitment from the firm, so those decisions need to be made with great care. Each has certain pros and cons. For example, on-site expansion is generally cheapest and does not disperse the existing labor force; however, the layout may get de-optimized, and maintaining a single location maximizes disaster risk.

Adding a new branch helps to diversify disaster risk, and the firm can design an optimal layout at the new facility; however, management now must deal with multi-site overhead, and any problems that exist at the current location will not be addressed. Relocating a facility may help to solve problems that exist at the current location, and the firm can design an optimal layout; however, there may be substantial moving and startup costs, the firm may lose good people who do not want to move, and maintaining a single location maximizes disaster risk. Location-related costs, such as utility and local labor costs, are often out of the firm’s direct control, so it is somewhat locked into dealing with these cost levels once the location decision is made.

QUESTION: Why is "quality of life" an element of intangible costs associated with location decisions? Provide an example as part of your discussion.