Question 2: Visit the websites of three major organizations in your region. Find out where their facilities are located. Explain some factors which should be considered while evaluating location options for a facility because globalization has made consumers expect the best products at the lowest prices irrespective of where they are produced. Companies are under competitive pressure to engage in global production and service operations due to the rapid growth of global markets
Plant Location can be affected by a number of factors. Some of these factors are:
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(a) Nearness to Customers: Nearness to customer helps a plant to incorporate customer needs into the products being made in the unit. Finished goods to customers can reach faster and in less cost. There is less chance of breakage or damage during transportation. (b) Nearness to raw materials: Cost of raw material input is a large cost in case of manufactured goods. The time & cost of transporting raw material is less if the plant is located near the source of raw material. For example, thermal power plants are located near to the coal mines. (c) Supply of capital: Short term and long term funds are required for any manufacturing or service industry. A company decides to locate its plant in such a location where fund movement is hassle free. (d) Logistic facilities and Infrastructure: Adequate roads, rail, phone, postal and transportation facilities are to be considered while deciding on the location of plant and service facilities. (e) Skilled labor Supply: Regular supply of skilled labor is one of the major factors to be considered while deciding on the plant or service location. Example: Software companies are located in Bangalore, Hyderabad and New Delhi. (f) Business Climate: Companies must find a positive business climate or environment in the area, state or a country to set-up manufacturing or service facility there. (g)Push and Pull Factors: Factors that draw a business away from a certain location are “push” factors. These include increasing costs, more competition, a reduction in demand or poor communication and transportation systems. Conversely, those that “pull” a business toward a location are lower labor costs, a growing consumer base, government incentives, improved transportation and communication systems.
Host community and political factors: The community near the industry proposed location should be willing to welcome the new industry. Local people should feel that there will be improvement in their quality of life due to the new industryÂ Natural Factor: Land, water, climate condition, sources of material attract and help some industries Example: Tea industry, cotton industry, coffee industry,coconut oil industry etc. Historical factors: Capitals of old kingdoms of yesteryears, large religious places sometimes attract companies to set up their plants. Initial start and living conditions: Some industries were started earlier in certain places during the British era in its early stages. The industries since then have developed making good living conditions. The related industries start getting located in the place. e.g: Jamshedpur, Kirloskarwadi. Personal factors: The history of the entrepreneuring company or family or personal considerations play a key role in location decision.Â Government policies: Government play their own role in the location decision of new industries. The Government of India and the state governments have made special efforts in making industries grow and made manufacturing and service units all over India with a view to have a balanced developmental spread all over the country and the region. Environmental considerations: Environmental issues for certain industries for a particular location are to be checked before deciding on location. International factors: For companies deciding to go overseas for locating a unit for manufacturing or service must consider behavioral aspects, cultural differences, technology, government policies etc Apart from location, there are other aspects to be considered while setting up a new business enterprise. These are:
Maybe you have an idea for a new business, or there may be an interesting business for sale in your area. Either way, it’s critical that you see the potential and risks to help inform your decisions as you move forward.Your community may lack a certain retail or service business, or there may be a business for sale that you believe you could sustain and improve. You might have ideas that would lead you to build a business that competes with a similar one, believing you can provide higher quality products, more variety or better and/or faster service. If you a need for a business and believe it could work, it’s just a matter of finding a client base to satisfy.
A feasibility study reveals, in statistical data, the size of your potential customer or client base. State governments put great volumes of demographic data on their economic development websites, so you can gather counts of individuals, numbers of households, age brackets, education and income levels and other demographic information—all identifiable by zip code, county and community.If your idea involves school children, you can find data relative to student enrollments by age, gender and school district, for public, private, parochial and home-schooled children. Specific state agencies have data on preschool children, children in foster care and those who are otherwise wards of the state, as well as all manner of data on seniors and incarcerated individuals.
Once you’ve gathered sufficient data about your potential trade area, you should estimate how many people and geographies don’t fit your model. For example, your bicycle shop might find many more customers in a community in the central plains states, where the topography is relatively flat, than in downtown San Francisco, which is full of very steep hills. In addition, some communities advertise themselves as being bicycle-friendly. Your demographic data might suggest that opening a day care business in a predominantly retirement-aged community is a bad idea because there are not enough children to support your operating expenses. Use conservative estimates to determine your potential market and market share. Loan officers and potential investors want certainty that you haven’t padded the numbers to increase revenue projections, so be prepared to defend your numbers.
Write a comprehensive business plan that includes sections on management (your experience and fitness for the specific effort you propose), operations (how you’ll actually conduct the business), marketing (how you’ll reach your target audience) and key advisers and staff (where will you get the human capital to ensure success). Your plan should also include data from the feasibility study that supports your estimates of market share and the time line to profitability. Again, use conservative estimates of revenues and liberal estimates of expenses. Funding sources will want confidence that you’ve thought things through carefully and thoroughly.
You may have the luxury to work full-time on your project, but if you have a day job that requires your attention then you’ll have to set aside evening and weekend hours to set up your business. Getting permits, licenses, FDA approval and patents take time. You might get a building permit or a business license in a few days, but FDA approval for a food or cosmetic product can take years. Patent research in the hands of a dedicated patent attorney takes time and can be expensive—as much as $30,000 or more. The same holds true if you’re renovating a property and your new effort requires an architect’s “stamp,” which might cost 10 percent of the construction cost. Simply put, plan on having your project take more time than you originally thought.
You may start your business with your own funds, then get support from friends and family. The next “layer” of funding can be a bank or Small Business Administration loan. SBA funding typically tops out at $150,000. Beyond that there are “angel investors,” who are individuals of means who take financial risks with entrepreneurs in return for an expected high return on their investment (ROI).If your project requires large sums of investment money, you may be able to find venture capital called professional money with a solid, conservative business plan. Venture capital money requires a very high ROI, though, because of the great risk of failure among start-up businesses Tax increment financing (TIF) funds help entrepreneurs rehabilitate distressed properties in certain communities. While TIF funds are set up as loans, some, most or all of the funding can be forgiven if the entrepreneur and the new business satisfy certain requirements, such as creating a certain number of jobs.
Along the way, you’ll probably need the advice and counsel of an accountant, attorney, contractor or architect.The SBA has offices in most major cities and a number of medium-sized ones as well.Become familiar with the National Business Incubator Association (NBIA). Incubators provide physical space and certain amenities—perhaps phone, fax, copy and Internet service—at no or minimal cost. They can provide access to consulting, accounting, legal and other resources, again at zero or minimal cost. They may charge a modest rent or take an equity position in your new company. In some cases the incubator may take a royalty or share in your licensing revenues.
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