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Production and Operations Management
Notes
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Caution Tax regulations, environmental regulations or various other kinds of government
policies and regulations can be important factors in the location decision.
There may be a more favourable investment climate in a particular geographical or political
region that may attract industry to invest in that region.
12.3.2 Factors Affecting Service Products
In service, the capacity to deliver the service to the customer must first be determined; only then
can the service be produced. What geographic area can you realistically service?
Example: A hotel room must be available where the customer is when that customer
needs it – a room available in another city is not much use to the customer.
The primary parameters on which the geographical location decisions are based for service
products have been enumerated below:
1. Purchasing power of customer drawing area.
2. Service and image compatibility with demographics of the customer drawing area.
3. Competition in the area.
4. Quality of the competition.
5. Uniqueness of the firm’s and competitor’s locations.
6. Physical qualities of facilities and neighboring businesses.
7. Operating policies of the firm.
8. Quality of management.
Example: Karim, a speciality restaurant in Delhi, had opened outlets in the major
upcoming markets in Delhi, Noida and Gurgaon. In the malls that are coming up in and around
Delhi, you see well known names like Marks and Spencer, McDonald’s, Tissot, Canon Nike, etc.
These are all decisions related to capacity.
Self Assessment
Fill in the blanks:
6. Assembly-type industries, in which raw materials are gathered together from diverse
locations and are assembled into a single unit, often tend to be located near the
……………… .
7. Adequate transportation facilities are essential for the ……………… operation of a
production system.
8. For companies that involved in import and export activities, location of ……………… is a
factor of prime importance in the plant location decision.
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