Factors That Affect Location Decisions The Basics Country

Factors That Affect Location Decisions The Basics: • Country Decision • Region/Community Decision • Site Decision

Country Decision 1. 2. 3. 4. 5. 6. Key Success Factors Political risks, government rules, attitudes, incentives Cultural and economic issues Location of markets Labor talent, attitudes, productivity, costs Availability of supplies, communications, energy Exchange rates and currency risks

Region/Community Decision 1. 2. 3. MN 4. WI 5. MI IL IN OH 6. 7. 8. Key Success Factors Corporate desires Attractiveness of region Labor availability and costs Costs and availability of utilities Environmental regulations Government incentives and fiscal policies Proximity to raw materials and customers Land/construction costs

Site Decision Key Success Factors 1. Site size and cost 2. Air, rail, highway, and waterway systems 3. Zoning restrictions 4. Proximity of services/ supplies needed 5. Environmental impact issues

Labor Productivity • • Area’s wage rate Companies do not want to go to low ↓Wage Rate = ↓Knowledge ↑Wage Rate = ↑Knowledge Labor cost per day Productivity (units per day) = Cost per unit

Exchange Rates and Currency Risk • With the low wage rate that particular country must have GOOD exchange rates

Costs • Tangible Costs- easily measured costs such as utilities, labor, materials, taxes • Intangible costs- less easy to quantify and include education, public transportation, community, quality-of-life

Political Risk, Values and Culture • National, State, Local governments’ attitudes towards private company • National, State, Local property, zoning and pollution laws • Workers values differ with culture • Do not want to insult a different countries beliefs, morals, and or culture

Proximity • → Markets Near customers • → Suppliers Near raw material • → Competitors clustering