What is location strategy in operations management?
What can better navigate you to the right location if not a road map, meaning the right location strategy? Simply put, location strategy is a plan that includes determining the objectives of your company and then finding the right location to achieve them. There are many factors to consider, so choosing a new location should be preceded by an in-depth analysis.
Important factors to consider while choosing a new location include:
1. Geographical proximity
According to IW calculations, due to the pandemic German companies saved $20 billion on business travel in 2020. Many companies worldwide have moved to a work-from-home model, and business travel has been replaced by online meetings. Does this mean that distance does not matter anymore? Not necessarily. When working on digital solutions, geographical proximity can be a competitive advantage. In IT nearshoring, working within a similar time zone facilitates daily communication which is crucial in the case of Agile project software teams.
2. Availability of skilled programmers
The IT talent shortage is a never-ending story. The pandemic has made matters worse and the demand for tech talents has risen on an unprecedented scale. According to CompTIA’s 2021 Workforce and Learning Trends report, 40% of organizations decided to employ tech staff during the COVID-19 pandemic. However, when looking for the right location, it’s also worth considering not only the availability, but also the proficiency of experts. Do they have the know-how and the right level of competences for your project? International rankings such as those published by HackerRank and SkillValue can be helpful here.
3. Costs
In the 1st quarter of 2021, wages in the IT sector rose by 20%. For this reason, hiring qualified software developers is becoming a real challenge. The costs of software development may vary significantly, depending on location. By outsourcing IT services to countries with a vast talent pool (such as Poland) you can lower the cost of software development without compromising quality.
4. Room for development
When searching for a new location, make sure to allow room for expansion – not only in terms of office space but also in the context of scaling the project team. When it comes to IT service centers located in larger cities, the scalability of teams is not an issue. In the case of nearshoring, the IT partner provides all necessary competencies according to the current needs. So, when thinking about development in the context of project growth and involving more specialists, it is worth considering IT nearshoring in the Time and Material model.
5. Availability of amenities and services
Last, but not least, while thinking about relocation, ensure that the appropriate infrastructure is in place for your employees – meaning amenities (housing and shopping areas, communication systems etc.) and services. If you do not plan to relocate employees, perhaps there is a provider on the local market who can take care of part of the work related to setting up a new office (e.g. preparing the facility, recruiting employees, taking care of processes and knowledge transfer). In such a case, you can take advantage of the Build-Operate-Transfer model.
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Examples of location strategy methods
The weighted scoring method / factor rating method
Using a weighted scoring method, you take a variety of aspects into consideration and evaluate them. Creating a list of important factors and weighing them accordingly is recommended. Eventually, you compare all locations and choose the option with the highest score.
Break-even analysis
With this method, you conduct a cost-volume analysis allowing for an in-depth insight into economic aspects. You need to identify both variable and fixed costs and make a decision based on the results.
The Center of Gravity Method
This method is particularly helpful in determining locations for distribution centers or in supply chain planning. It consists in determining the optimal location in terms of transportation costs.
How to find an optimal location?
When it comes to choosing the optimal location, decisions cannot be made overnight. There are many other factors to consider, for example, legal regulations, level of digitization, transportation costs, and quality of life in a given area. A general to specific strategy can come in handy here. After deciding on the country, then it will come time to get a closer look and choose the exact location. In the process of getting to know the best IT service providers to support your project, do not underestimate the value of the organizational culture of your IT partner. In the end, people are at the heart of every business.
Focus on Poland – the shining star of IT nearshoring services
For many European countries looking for IT nearshoring partners, Poland has become a natural choice. Poland is a valuable European academic center of ICT, science and engineering. The expertise and vast talent pool make this country an advantageous location and an important supply base for other European countries struggling with the problem of an IT talent shortage. According to the “European Cities and Regions of the future 2022/2023” report, Polish cities and regions are ranked highly among the best investment locations. Apart from the ranking of large cities, Poland can boast of 4 mid-sized regions on the list of the top 10 most business-friendly areas in Europe (Lower Silesia, Lodz Voivodeship, Greater Poland, and Lesser Poland).
Find out more about this location: Why Poland?
Warsaw
The capital of Poland is ranked 2nd in Europe in terms of business friendliness. Researchers also emphasize Warsaw’s significant economic potential.
The capital of Poland is number 7 in the overall ranking of major European cities in 2022 / 2023; what is more, the Masovian Region has been recognized as one of the top 10 areas in Europe in terms of cost-effectiveness and investment potential.
Read more about Warsaw!
Katowice
The capital of the Silesia region, traditionally associated with mining and heavy industry, is today one of the best locations for IT nearshoring in Poland.
The city of Katowice is number 5 in the ranking of large European cities of the future. In turn, the Silesian region is ranked 4th on the list of the most important regions for investment.
Read more about Katowice!
Krakow
Krakow, a well-known tourist attraction, is the clear winner in terms of business friendliness. It is also ranked number 2 when it comes to human capital and lifestyle, which makes it the right choice for BOT model-based projects. An extensive base of university graduates makes it an ideal place to build IT teams and open software development projects.
Summary
Choosing the right new locations for companies or outsourcing services is now possible thanks to different techniques such as break-even analysis, the weighted scoring method / factor rating method or the center of gravity method. When it comes to team building (e.g., for multi-location teams), selecting the location is just the first step. The next one is to implement suitable management standards that ensure the efficiency of your team. We recommend you familiarize yourself with our materials and guides on agile methodologies.
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FAQs
Simply put, location strategy is a plan that includes determining the objectives of your company and then finding the right location to achieve them. There are many factors to consider, so choosing a new location should be preceded by an in-depth analysis.
What are the five service location strategies? ›
TRENDS IN LOCATION STRATEGY
The top five location factors for global companies are costs, infrastructure, labor characteristics, government and political issues, and economy.
What are the types of location in operations management? ›
There are four main types of facility layouts: process, product, fixed-position, and cellular.
Why is location strategy important in operations management? ›
Having a good location strategy allows you to obtain the optimal location aligned to your organization's needs and objectives, one that allows your firm to maximize opportunity while minimizing costs and risks.
What is an example of a strategic location? ›
The mountain commands everything in its sight and was therefore a strategic location for both sides during the war. Its strategic location on the lake makes it one of the finest bass fishing spots in the nation. The town remained prosperous through trade and its strategic location.
What are location strategies? ›
Simply put, location strategy is a plan that includes determining the objectives of your company and then finding the right location to achieve them. There are many factors to consider, so choosing a new location should be preceded by an in-depth analysis.
What is location based strategy? ›
Location-based marketing is a direct marketing strategy that uses a mobile device's location to distribute content or services (such as push notifications) associated with a particular place.
What are location factors in operations management? ›
The seven factors affecting a location decision in operations management are facilities, competition, logistics, labor, community and site, political risk and incentives, according to Reference for Business.
What is an example of location planning? ›
For example, a car manufacturing company wants to start its manufacturing unit in India. For this, it selects four appropriate cities i.e. Noida, Gurgaon, Chandigarh, and Jaipur. To choose the best location for its manufacturing plant, the company adopts a rating plan method according to its business requirements.
What are the strategic advantages in choosing location? ›
Five location advantages you should consider are trade access, consumer/market proximity, adjacent business communities, proximity to talent sources and lower costs.
»favourable position exp. »vantage point exp. »strategically located exp. »privileged location exp.
What are three primary location based tactics give examples? ›
The three main components to location-based marketing are geofencing, geotargeting and geoconquesting. Geofencing refers to drawing an area around a location, or locations, where an audience visits in order to serve them real-time ads and content.
What is an example of location-based? ›
One example of a query-based location-based service is a user checking a mobile map application, such as Waze, to find the nearest automated teller machine. Some location-based services also enable users to check in to restaurants, concerts or sporting events using apps such as Foursquare, Yelp or Google Maps.
What are examples of location based services? ›
Commonly used examples of location based services include navigation software, social networking services, location-based advertising, and tracking systems. LBS can also include mobile commerce when taking the form of coupons or advertising directed at customers based on their current location.
What are the two main types of location? ›
Geographers can describe the location of a place in one of two ways: absolute and relative.
What are the two types of location? ›
Location, one of the five themes of geography, seeks to answer a simple question: “Where is it?” There are two types of location that we have defined: absolute and relative location.
What are the 4 methods of evaluating location alternatives? ›
Four major methods are used for solving location problems: the factor-rating method, locational cost–volume analysis, the center-of-gravity method, and the transportation model.
What are the steps in location analysis in operations management? ›
It involves three steps: 1) For each location alternative, determine the fixed and variable costs, 2)For all locations, plot the total-cost lines on the same graph, and 3) Use the lines to determine which alternatives will have the highest and lowest total costs for expected levels of output.
What are the 7 key location factors? ›
The 7 factors of location that might affect an industry are the availability of raw materials, labour, capital, market access, a plentiful supply of electricity, modes of transportation and land.
What are the factors of location planning? ›
Location Selection Factors
For a company which operates in a global environment; cost, available infrastructure, labor skill, government policies and environment are very important factors. A right location provides adequate access to customers, skilled labors, transportation, etc.
The main objective of location decisions is to position each element of the production /distribution system with respect to the overall system. A manufacturing plant must be strategically positioned between its supplies and customers.
What are the levels of location decision? ›
Understand the three levels of market analysis related to location decisions: market, neighbourhood and property.
What are location based advantages? ›
Location-specific advantages or LSAs are those location-specific market features and/or factors of production that enable a firm to achieve an improved financial outcome from the provision of the same product or service relative to alternative locations.
What are the 4 P's of service strategy? ›
The four Ps are the key considerations that must be thoughtfully reviewed and wisely implemented in order to successfully market a product or service. They are product, price, place, and promotion.
What are the six elements of service strategy? ›
So it is with interest that I read the latest report by Razorfish: Liminal. The report identifies 6 Engagement Elements (Valued, Efficiency, Trust, Consistency, Relevance, Control) that matter to customers.
What are location strategies in marketing? ›
Location-based marketing allows organizations to target consumers at a granular, person level with online or offline messaging based on their physical location. Using location data, marketing teams are able to reach consumers based on qualifiers like proximity to a store, events happening in their region, and more.
What is an example of a service strategy? ›
Service strategy examples
Examples include self-checkout kiosks in retail stores, online customer support portals, and mobile banking apps.
What are the 4 C's of service marketing? ›
The 4 C's of Marketing are Customer, Cost, Convenience, and Communication. These 4 C's determine whether a company is likely to succeed or fail in the long run. The customer is the heart of any marketing strategy. If the customer doesn't buy your product or service, you're unlikely to turn a profit.
What are the three components of service strategy? ›
Organisations should instead migrate to a service-focused mindset, in order to develop services that are valued by and relevant to customers. A service strategy should have at least three components: tangibility, timeliness, and a trial-and-error spirit.
What are the 4 four strategy elements? ›
The marketing mix, also known as the four P's of marketing, refers to the four key elements of a marketing strategy: product, price, place and promotion.
Here are the 7 basic elements of a strategic plan: vision, mission, SWOT analysis, core values, goals, objectives, and action plans.
What are the 5 components of strategy? ›
These five elements of strategy include Arenas, Differentiators, Vehicles, Staging, and Economic Logic. This model was developed by strategy researchers, Donald Hambrick and James Fredrickson. To achieve key objectives, every business must assemble a series of strategies.
What are the five 5 elements in strategic management? ›
A strategy consists of an integrated set of choices. These choices relate to five elements managers must consider when making decisions: (1) arenas, (2) differentiators, (3) vehicles, (4) staging and pacing, and (5) economic logic.
What is location strategy for service business? ›
A business location strategy is your plan to find the optimal location for an organization. This requires an analysis of company goals and objectives and finding a location that meets them. Your company's location strategy should align with any overriding corporate structure or strategy.
What is location planning in operations management? ›
Location planning is the process to help evaluate the impact of location on the consumer buying process. No single location is the same as another. It's obvious but it's surprising how often brands and retailers don't account for this fact.
What is service operations strategy? ›
An operations strategy is the set of strategies, plans, and policies regarding the operations, financing, marketing, human resources, and control of an organization. The operations strategy considers how the service firm should be structured to manifest the service concept.
What is an example of positioning strategy for service? ›
Positioning based on product or service is a common approach. It focuses on how your product or service solves a problem for customers. For example, if your company sells toothpaste, you might position it based around features such as teeth whitening or tartar control.
