A company’s business strategy as well as external developments such as e.g. geopolitical trends lead to locational challenges in terms of creating or reducing new operations or facilities. In order to be able to determine the right location strategy, companies are applying a strategic approach to these challenges by conducting location scenario analyses, addressing questions such as:
- Do we want to cover a region with one, two or more distribution centers or manufacturing plants?
- What is the right mix of onshore, nearshore and offshore locations for our back office activities?
- Is it better to build a new plant in Asia and ship the products to Europe and the US and sell the products there or is a postponed manufacturing model the preferred option?
Importance of location strategy development
Companies invest in new manufacturing, distribution or office locations with a long-term perspective. In the current global environment however, uncertainty is a given. Geopolitical turmoil, technological developments, labor market challenges, tax climate changes etc. are having an impact on the cost effectiveness, the quality of the business environment and the risk profile of current locations. But these challenges also make it complex to determine the optimal location strategy for the future. Do we need to be closer to the markets? Can we continue consolidating into a truly global structure? Do we need to regionalize or even localize? A thorough process to determine the optimal location strategy is therefore key.
Criteria used when making new location decisions
In location scenario analyses it is key to create scenarios taking into account various directions of the future development of the company: which new markets will be entered? Which new products will be launched? What role will new technology play? Are there significant mergers or acquisitions to be expected? Another important input for the location scenario analyses are the foreseen and unforeseen external developments such as geopolitical developments, global trade policies, regulatory changes, labor market developments, new upcoming location hotspots, etc.
Based on the business strategy and external factors different location scenarios can be defined and analyzed based on cost, qualitative and risk factors in order to determine to optimal location strategy going forward.
Location Strategy & BCI advice
BCI supports clients in developing a clear location strategy that is aligned with the overall business strategy, coping also with potential external developments. Based upon the business requirements by geography we develop a clear location strategy addressing the company’s needs from a cost, quality as well as risk perspective. The typical steps in BCI’s location strategy development approach are:
- Analysis of the business strategy
- External factors analyses
- Definition of location scenarios
- Location scenario analyses
- financial assessment
- qualitative assessment (e.g. business environment, labor market, suppliers, etc.)
- risk assessment (such as political, economic, transparency, natural disaster risks)
- Analysis and review of all location scenarios
- Business case and recommendation
The benefit to the client is first of all a fact-based and comprehensive location strategy to prepare the company for the future. Also, a clear framework is developed, including different location scenarios, which can be used for future analyses when internal or external factors change with a potential impact on the future location strategy.
FAQs
A good location strategy couples a clear understanding of who you intend to reach and the demographics surrounding a potential site. You want to be confident that the people who have the best access to your location are the ones your business best appeals to.
What makes a location strategic? ›
A good location strategy couples a clear understanding of who you intend to reach and the demographics surrounding a potential site. You want to be confident that the people who have the best access to your location are the ones your business best appeals to.
How do you determine location strategy? ›
The typical steps in BCI's location strategy development approach are:
- Analysis of the business strategy.
- External factors analyses.
- Definition of location scenarios.
- Location scenario analyses. financial assessment. ...
- Analysis and review of all location scenarios.
- Business case and recommendation.
- Location of Raw Materials: Companies will be persuaded to locate their operation close to source of material for following three reasons: ...
- Proximity to Markets: ...
- Labor Factors: ...
- Taxes: ...
- Community Considerations: ...
- Utilities: ...
- Site Related Factors:
Having a good location strategy allows you to obtain the optimal location aligned to your organization's needs and objectives, one that allows your firm to maximize opportunity while minimizing costs and risks.
How to build a location strategy? ›
Five steps to a successful new location strategy
- Step 1: Define business goals for each new site and each existing facility. ...
- Step 2: Research prospective locations and new markets. ...
- Step 3: Develop your new location strategy and stick with it. ...
- Step 4: Execute the program and focus on meeting your goals.
The top five major factors identified that may strongly influence international location decisions generally were: costs, infrastructure, labour characteristics, government and political factors and economic factors. What are the factors that influence the plant location decision?
What is the location strategy model? ›
Simply put, location strategy is a plan that includes determining the objectives of your company and then finding the right location to achieve them.
What are the criteria for deciding the location? ›
Locational criteria factors are things such as population of the town or city, the traffic counts by the location for the day or during certain parts of the day, proximity to traffic arteries, visibility, accessibility, etc.
What is targets location strategy? ›
Design and location plus ease, inspiration and relevance: Target has a proven strategy to build stores that work in and for the community. We set that formula in motion across a variety of neighborhoods and building footprints in 2022, from Wyoming to Florida, city centers to suburban hubs.
The seven location factors that affect an industry are the availability of raw materials, labour, capital, market access, a plentiful supply of electricity, modes of transportation like railroads and roads for the transport of finished goods and raw materials, and the availability of land.
What are the 5 location factors? ›
These location factors will help you decide whether or not a community is ideal for your business:
- Market and Demographics. It's important to know who your ideal customers are when choosing a business location. ...
- Traffic. ...
- Accessibility. ...
- Competition. ...
- Costs. ...
- Growth Potential.
"When you're developing a new location strategy, you're likely to encounter these top challenges: (1) location strategy is viewed as merely a 'real estate project,' (2) some of its aspects may have negative impact on some employees, (3) designing location strategy without workplace strategy, (4) making decisions from a ...
What is an example of a strategic location? ›
The mountain commands everything in its sight and was therefore a strategic location for both sides during the war. The town remained prosperous through trade and its strategic location. Because of its strategic location near the mouth of the river, the town gradually increased in importance.
What is location based strategy? ›
Location-based marketing is a direct marketing strategy that uses a mobile device's location to distribute content or services (such as push notifications) associated with a particular place.
What is important to your place strategy? ›
The place strategy in marketing mix is all about finding best way to distribute and retail your offerings. Firstly, place strategy helps us take important decisions regarding the location of retail. Secondly, it also helps us decide the format of retail, channel of distribution and type of exclusivity of the retail.
What is an example of strategically located? ›
You can use it when you want to emphasize the important role that a place's location has in its overall purpose. For example, "The new factory is strategically located near the main highway for easy transportation of goods."
What is the location strategy theory? ›
Locational strategy focuses on the location decision as the key unit of analysis. Organizations locate in order to maximize access to key resources, and jurisdictions do their best take advantage of location decisions.
What are the five major factors considered in location decisions? ›
Here are five key factors we analyze when consulting clients that are considering a new location for their organization:
- Net Tax/Cost. A net tax/cost approach is based on the unique cost effects of each specific location. ...
- Workforce Analysis. ...
- Competitive Gap Analysis. ...
- Incentive Procurement. ...
- Reporting and Compliance.
