Importance of location planning
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The document discusses factors that companies consider when deciding on a new location for a business unit or plant. Key factors include proximity to markets and raw materials, availability of infrastructure like water and electricity, and changes in economic or social conditions that make an existing location less attractive. New facilities may be needed to improve quality, meet rising demand, or due to mergers and acquisitions which could require a new location. Government policies can also influence location decisions through tax benefits or other incentives.
Importance of location planning
- 3. • If the company wants to expand and diversify its activities, it will have to search for a new- location for setting up its new business unit.
- 4. • If an existing plant is not near a market place, the transport cost will increase the cost of the product. So the company will search for a new plant location which is near the market. • Such location of plant must be convenient to the employees and must have a regular supply of water and electricity.
- 5. • Generally, a plant must be located at a place where raw-material is available. • For example, if oil and gas are found at some place, then a new petrochemical plant has to be set up there for processing purpose.
- 6. • Plant location-related decisions will have to be taken if the organization wants additional facilities. • New facilities may be necessary to improve the quality of work, to meet rising demands, etc.
- 7. • Mergers, joint-ventures, and Amalgamations may lead to start a new unit at a new-location. • It may even require closure of an existing plant unit. • In mergers, production is mostly started at a new place as per the new-agreement.
- 8. • Each political party has its own philosophy. Political changes can lead to changes in economic policies of the government. • This may make the existing location unattractive for doing business. • Social changes may require production of eco- friendly goods. This may require a change in location.
- 9. • Demand for the company's product may increase at other places, especially in abroad countries. So, the company will have to start a branch in another state or in foreign countries. • This would lead to a search for new location of plant.
- 10. • Government may announce some tax benefits for starting a business in rural areas. This may motivate entrepreneurs to start their business units in remote areas.