How Have Cost Considerations Influenced Facility Location Decision?
Autor: Luther2013 • February 27, 2013 • Term Paper • 633 Words (3 Pages) • 1,540 Views
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Marketing
Q1. How have cost considerations influenced facility location decision?
The main objective of many businesses is the maximization of profits from their various activities. Businesses can only achieve to maximize profits if there is maximum collection of revenues and minimum cost of production. In most cases, the levels of sales are majorly influenced by price which is a function of the cost of production. Facility location has a direct effect on the total costs hence managers are keen to ensure that facilities are located in places where there is minimal cost so as to maintain low prices and attract many customers (Murphy and Wood 87). In relation to price levels, consumers are very sensitive prices and they prefer making purchases when prices are low.
Q2. Discuss how population can be viewed as both a market for goods and source of labor?
Population has a major influence on the location of consumer goods companies. Many businesses consider locating their facilities closer to majority of their consumers so as to improve their services. There are various attributes of population that are very important to the business such as changes in the size of the population and the characteristics of the population. Large populations mean that a business has a large market for its products in terms of current and potential customers (Murphy and Wood 97). Census reports are important for any business because they determine the size of a population and businesses may use such data in calculating the sizes of their markets. The characteristics of a population such as purchasing power also determine the level of demand for a product in terms of demand. For instance, aged populations increase the demand for health products and services because of high levels of sickness among such populations.
In the case of population as a source of labor, business organizations consider locating their businesses in places where there are favorable characteristics of labor. These characteristics include prevailing wage
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