Three Important Factors for Site Selection
- June 21, 2018
- Posted by: Yolandy
The site selection decisions of enterprises are the major issues that need to be faced during the course of business operations. Whether the decision is correct or not greatly affects the success or failure of the company’s operations. Therefore, the decision-making of the company’s location needs to evaluate the costs and benefits of all parties. The location selection strategy of an enterprise is mainly influenced by factors such as cost, market, and government. The operating costs of an enterprise are mainly composed of production costs, transportation costs, and transaction costs, and the combined effect of these costs affects the company’s cost-profitability and influences the company’s investment intentions. The market demand is a prerequisite for determining market supply, and therefore the production selling will guide corporate capital investment, while the service efficiency, transparency, and industrial policy guidance and restrictions from governments will also affect the industry’s regional development environment, and thus affect the company’s site selection decisions. With the effects under the much influence factors, Tanikawa summarize the three important factors for site selection as follows: 1. Cost Factor Cost is an important factor in the consideration of a company’s site selection. Site selection costs include both fixed and variable costs. The fixed cost is the cost that must be spent to maintain the normal operation of the enterprise, such as the depreciation of the manufacturing workshop and machinery and equipment. Therefore, due to the different choice of the site selection decision from enterprises, there may be regional differences in fixed costs. The variable costs of business operations mainly include the value of production factors such as raw materials, fuels, and power. Since the prices of raw materials, fuel, and power vary in different regions and locations, the variable cost is also an important factor to consider in the location of a company. 2. Location Conditions Another factor in the site selection for enterprises is location conditions. The location conditions cover many factors such as the convenience of transportation in the area, labor resources, local policies and living conditions. For manufacturing companies, the transportation costs of products and raw materials account for a large proportion of the total cost. The quality of the traffic conditions, the distance of the transportation, the number of transportation links, the mode of transportation, and the time of transportation all have a direct impact on the cost of transportation. Therefore, a reasonable site selection can reduce transportation costs to some extent. 3. Labor factors Labor cost is the most important part of the company’s operating costs. Choosing regions with abundant labor force and low prices will help to reduce the production and operating costs. However, for the enterprises with high technological content, high-quality human resources are their greatest needs. Therefore, the supply of labor force is an important condition for site selection. As the most professional supplier for site selection plans in China, Tanikawa will help investors to make the most suitable site selection planning, including that to analyze the decision factors for site selection, will provide the full process service from consulting to project operation for investors.