Choice of Location for a Manufacturing Company - Essay Example

The paper "Choice of Location for a Manufacturing Company" is a great example of an essay on business. The business site is one of the major determinants of business success or failure. In fact, a business location has a large influence on how such a business performs economically since it determines how well it connects with its stakeholders such as the customers, suppliers, and distributors (Hill, 2011 p52). Most significant is the fact that a business location determines the revenues generated and costs incurred by a business, thus determining how competitive business can be in the market that it serves (Rao, 2007 p28). Therefore, for a manufacturing company, there are various factors that should be considered to determine the most appropriate location for the company.

According to the location theory, the geographical location of economic activity is essential in determining what economic activities are located in a certain geographical region and the reasons behind the selection of the location (Spindler, 2010 p63). The theory works on an assumption that a business agent will act in its own interest. Therefore, a business will settle on a location that maximizes its utility, in terms of enhancing its connectivity to the stakeholders, cost reduction possibilities, access to sources of material and ease of distribution of its products (Rao, 2007 p27). The location theory has been applied outside the field of economics, in disciplines such as environmental science, to determine the location of businesses and other facilities, mostly the manufacturing facilities, to mitigate the negative environmental impacts associated with such businesses. 

Therefore, it is advisable for the manufacturing company to look for a location that allows proximity to labor forces. This is because; accessibility to sources of labor determines how well the operations of the company will be run. By locating the company in a region where it can easily access the labor force, the manufacturing company will be in a good position to minimize the costs involved in importing the labor force (Cavusgil, Knight and Tiesenberger, 2011 p32). Proximity to sources of raw material to be used in the manufacturing process is yet another factor that the company should consider. This is because, if the company settles for a location that is very far from where the raw materials are obtained, it will increase the costs and the logistics involved in transporting the materials, while also increasing the inconveniencies and the risks involved in these logistics (Rugman, 2009 p67). Thus, it is essential for a business to settle for a location that has close proximity to the sources of raw material.

Another important consideration that the business should make is its proximity to the markets. The manufacturing company should settle for a location that is close to its markets (Daniels, Radebaugh, and Sullivan, 2011 p44). This is because, the proximity to the markets determine the costs involved, while also influencing the logistics involved in delivering the manufactured products to the markets.  In a situation where a manufacturing facility is located far away from the markets, it requires to enlist the services of distributors or other intermediate agents, an aspect that increases the costs and the logistics involved (Dicken, 2007 p24).  For example, Shell Chemicals, a multinational company has always located its company close to the targeted market, an aspect that has highly contributed to its success. It is therefore important that the manufacturing company settles for a location that is close to the markets since it reduces the costs and the inconveniencies involved in delivering the finished products to the customers while improving the competitive advantage of the company (Hill, 2011 p53). In my opinion, proximity to the market and proximity to sources of raw material are the most important factors that should determine the location of the manufacturing company.