Location Strategy and its Importance

The following events are quite common in any business venture:

• Establishment of a new venture
• Expansion of the existing business
• Significant change in existing demand, supply and marketing locations
• Significant change in the cost structure
• Government policies

Because of these events, an organization will be keen in additional or alternate sites for its production activities. So the plant location becomes an important decision which in turn influences plant layout and facilities needed. Also, it influences capital investment and operating costs. For example, in steel industry, if we integrate the unit’s right from ore extraction to final steel formation in a nearby area, the transportation cost would be substantially reduced and also, the availability of supplies to the final stage of production in the integrated plant would be improved. This in turn, improves the productivity of the plant.