The process of choosing where to locate a unit producing goods or services. This must take account of a range of variables to achieve the minimum cost that optimizes the overall strategy of the particular organization. There are three basic strategies. In a product-based strategy, independent facilities are used to produce each product in a company's range. This permits dedicated design and organization of facilities, which may vary from product to product. A market-based strategy gives priority to locating as close to customers as possible. This is clearly important in the case of services and for organizations offering a quick response to customer requirements, e.g. in fast-moving consumer goods. A vertically differentiated strategy locates different elements of the process at different sites, according to the economic characteristics of each element. These considerations are particularly important for transnational and global operations.
Subjects: Business and Management.