Imaginative Toys

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The choice of a location for an organisation is very important. Location decisions even though not made often are very important to the growth of an organisation. Location decisions are made for various reasons like expanding an organisation’s customer base and or building the capacity to absorb the growing demand for an organisation’s goods or services. If an organisation is strategically located in terms of say the availability of resources it is able to gain a competitive advantage over its competitors. This decision is however not limited to new organisations, existing organisations also have to make location decisions if an expansion of the old facility is simply not enough. There are four location options an organisation considers in making the location decision. The first is to expand the existing facility; if there is space available the viable option is to expand the existing facility to absorb the growing capacity, this eliminates the cost of acquiring a new site and employing labour. The second option is to acquire a new facility in addition to the already existing facility. This option is especially attractive for organisations who would want to expand their market share and also venture into a different environment. This is so because this option usually involves the organisation locating the facility outside the parent company’s home country. It involves a lot of starting capital since a favourable site has to be acquired and labour employed for the facility. The third option involves shutting down the existing facility and building a new one that would have the capacity to absorb products. This third option requires the organisation to look outside its current location for a suitable location that would have the necessary space for the expansion of the facility. The final location option is to do nothing; that is maintain the status quo. This final option has the potential of causing financial loss to the organisation and loss of market value. If the organisation’s current facility is unable to absorb its current production capacity it would not be able to meet its forecasted targets. This would mean that demand of the product would exceed its supply which would cause a shortage on the market. This would have a negative influence on the perception of the products on consumers. Gerald Kramb’s Imaginative Toys has been manufacturing “learning toys” for the past 16 years. The company in the past year has fully utilised its production capacity and with the introduction of a new line of toys Kramb realises the need for the organisation’s capacity to expand to meet its production needs. After carefully considering the location options available to the organisation Kramb has realised that simply expanding the existing facility is not a viable option. Imaginative Toys is now considering a location outside its home country and has found two alternative locations. Their problem now is choosing the right location considering the advantages and disadvantages of both locations. Location position is influenced by several factors like location of raw material, proximity to the market, climate and culture. Location decisions are in three broad parts country decision, regional/community decision and site decision. These three broad decisions have several factors that affect the kind of location decision an organisation takes. Country decision is affected by factors like the political risks, labour talent, productivity and cost, market location, exchange rate and currency risk and cultural and economic issues. The factors that affect the regional/community decision are labour availability and cost, attractiveness of the region, proximity to raw materials, environmental regulations, and corporate desires and so on. The success factors of the site decision are the site size and cost, availability of transportation, proximity to customers, suppliers and services, regional restrictions and...
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