Political Factors
Location choice relies on the political stability of the chosen country. There is a preference to locate facilities in countries with a stable political regime where rules regarding commerce and ownership are well defined. Those countries with clear, independent and transparent legal systems allow companies to have recourse in courts if needed, making investing in facilities in these countries easier.
Infrastructure Factors
To make it easier to locate facilities, there is a need for goods infrastructures. These include site availability, labour availability, excellent transport links through rail airports and seaports, access to good road systems and local utilities.
Competitive Factors
Organisations must consider their competitor’s strategy, size, location, and strengths. Factors including labour availability, access to raw materials and positive externalities influence the decision to locate near competitors. Positive externalities are where companies locate close to each other for mutual benefit. Examples include retail outlets that congregate to increase the overall demand and make it easier for customers to drive to one location to meet their needs. This results in increased demand for the retail stores located in these areas.
Where there are no positive externalities, companies locate to try to capture the market’s largest share. Where companies do not have control of price, they must compete on distance from the customer. This can be achieved by locating close to competitors and splitting the market with their competitors.
The belief that supply chains and logistics have increased expenses for businesses attempting to sell goods on the market has long been held. It is now acknowledged that the transit and storage of commodities significantly add to the item’s worth. Supply chain information might be utilised to guarantee that a product is delivered to a customer or end user in the proper location and condition.
Because of this, supply chains can compete based on providing either at the lowest possible cost or at the highest possible value to the customer. The supply chain comprises the most significant cost component of a company’s revenues and comprises two essential elements: strategic sourcing and logistics. These elements include the flow of information, business processes and decisions to specify, design, plan, purchase, transport, warehouse, inventory and deliver materials and services to internal and external customers. Most importantly, the supply chain integrates all decisions, processes, and activities on a lowest-total-cost life-cycle basis, from raw materials to end-users.
The efficiency and effectiveness of these processes are quickly becoming industry-competitive differentiators. A supply chain integrates core business and customer needs with best-in-class supply base capabilities. It helps companies routinely achieve price and cost reductions and drives profitability upwards.