Deck 8: Location Strategies

Question 1

Labor cost and labor availability often drive the location decision in the call center industry.

Answer 1

True

Question 2

The graphic approach to location break-even analysis displays the range of volume over which each location is preferable.

Answer 2

True

Question 3

Unfavorable exchange rates can offset other savings in a location decision.

Answer 3

True

Question 4

Starbucks Coffee's approach to choosing new café locations is largely based on executive intuition, not sophisticated models and site selection technology.

Question 5

When innovation replaces cost as a firm's focus for location decisions, the presence of other state-of-the-art firms is a plus, not a negative, for the firm's competitiveness.

Question 6

The center-of-gravity method finds the location of a centralized facility, such as a distribution center, that will maximize the organization's revenue.

Question 7

Location decisions are based on many things, including costs, revenues, incentives, attitudes, and intangibles, but not on ethical considerations.

Question 8

Generally, the objective of the location decision is to maximize the firm's profit.

Question 9

For a location decision, labor productivity may be important in isolation, but low wage rates are a more important criterion.

Question 10

Lists have been developed that rank countries on issues such as "competitiveness" and "corruption."

Question 11

The ratio of labor cost per day to productivity, in units per day, is the labor cost per unit.

Question 12

FedEx chose Memphis, Tennessee, for its central location, or "hub," primarily because of the incentives offered by the city of Memphis and the state of Tennessee.

Question 13

One reason for a firm locating near its competitors is the presence of a major resource it needs.

Question 14

An example of an intangible cost, as it relates to location decisions, is the quality of education.

Question 15

Service firms choose locations based, in part, on the revenue potential of a site.

Question 16

The factor-rating method can consider both tangible and intangible costs.

Question 17

Manufacturers may want to locate close to their customers, if the transportation of finished goods is expensive or difficult.

Question 18

The location decisions of goods-producing firms will generally pay more attention to parking, access, and traffic counts than will service location decisions.

Question 19

In location decisions, intangible costs are easier to measure than tangible costs.

Question 20

The transportation model calculates an optimal shipping system between a central facility and several outlying customers.

Question 21

Why is Northern Mexico used as a cluster for electronics firms?

A) high traffic flows
B) venture capitalists located nearby
C) natural resources of land and climate
D) NAFTA
E) high per capita GDP

Question 22

Currency risk is based on what assumption?

A) Firms that do not continuously innovate will lose market share.
B) Values of foreign currencies continually rise and fall in most countries.
C) Changing product lines by reacting to every current trend may alienate the customer base.
D) The value of one dollar today is greater than the value of one dollar to be received one year from now.
E) The U.S. stock market fluctuates daily.

Question 23

Which of the following was not a factor in determining the location of Intel's Arizona plant?

A) skilled labor availability
B) U.S. laws to protect intellectual property
C) tax breaks from local and regional government
D) proximity to Intel's California headquarters
E) All of the above were key factors.

Question 24

Which of the following workers is the most productive?

A) $50 wages, 10 parts produced
B) $10 wages, 1 part produced
C) $30 wages, 5 parts produced
D) $100 wages, 21 parts produced
E) $500 wages, 100 parts produced

Question 25

Which of the following statements regarding FedEx is true?

A) Its hub in Memphis, Tennessee, was selected because of its low cost.
B) Memphis, Tennessee, is the only hub in the company's global flight network.
C) FedEx believes the hub system helps reduce mishandling and delays due to better controls.
D) FedEx uses a hub system in the U.S., but a city-to-city network in other countries.
E) Memphis is FedEx's only hub airport in the United States.

Question 26

FedEx chose Memphis, Tennessee, as its U.S. hub because

A) the city is in the center of the U.S., geographically
B) the airport has relatively few hours of bad weather closures
C) it needed a means to reach cities to which it did not have direct flights
D) the firm believed that a hub system was superior to traditional city-to-city flight scheduling
E) All of the above are true.

Question 27

Which of the following statements regarding the center-of-gravity method is false?

A) It is designed to minimize the maximum possible travel distance to any location.
B) The optimal x- and y-coordinates are calculated separately.
C) The optimal solution is unconstrained, so it could suggest a location in the middle of a body of water.
D) The weights used are the quantity of goods moved to or from each location.
E) The origin of the coordinate system and the scale used are arbitrary, just as long as the relative distances are correctly represented.

Question 28

The reason fast food restaurants often are found in close proximity to each other is

A) they enjoy competition
B) location clustering near high traffic flows
C) low cost
D) availability of skilled labor
E) all of the above

Question 29

A employee produces 15 parts during a shift in which he made $90. The labor content of the product is

A) $90
B) $5
C) $6
D) $.167
E) none of the above

Question 30

A location decision for an appliance manufacturer would tend to have a(n)

A) cost focus
B) focus on finding very highly skilled technicians
C) revenue focus
D) environmental focus
E) education focus

Question 31

Starbucks Coffee's use of geocoded demographic and consumer data in site selection decisions is an example of the use of a Geographic Information System, or GIS.

Question 32

Location decisions of goods-producing companies often assume that costs are relatively constant for a given area; therefore, the revenue function is critical.

Question 33

Industrial location analysis typically attempts to

A) minimize costs
B) maximize sales
C) focus more on human resources
D) avoid countries with strict environmental regulations
E) ignore exchange rates and currency risks

Question 34

In location planning, environmental regulations, cost and availability of utilities, and taxes are

A) global factors
B) country factors
C) regional/community factors
D) site-related factors
E) none of the above

Question 35

Among the following choices, an operations manager might best evaluate political risk of a country by looking at which type of country ranking?

A) based on competitiveness
B) based on cost of doing business
C) based on corruption
D) based on magnitude of government social programs
E) based on average duration between presidential/prime minister elections

Question 36

Governmental attitudes toward issues such as private property, intellectual property, zoning, pollution, and employment stability may change over time. The term associated with this phenomenon is

A) bureaucratic risk
B) political risk
C) legislative risk
D) judicial risk
E) democratic risk

Question 37

__________ and __________ are to key country success factors as __________ and __________ are to key region success factors.

A) Cultural issues, location of markets; site size and cost, zoning restrictions
B) Exchange rates, labor availability; site size and cost, environmental impact
C) Labor cost, currency risk; land costs, proximity to customers
D) Land costs, proximity to customers; labor cost, air and rail systems
E) All of the above are accurate relationships.

Question 38

Instead of comparing the salaries of Detroit autoworkers to foreign autoworkers to determine if Union labor prices are the cause of Detroit's financial woes, which of the following should be used?

A) labor content per vehicle
B) labor productivity
C) total production
D) A or B
E) None of the above, salary is the best comparison.

Question 39

A location decision for a traditional department store (Macy's) would tend to have a(n)

A) cost focus
B) labor focus
C) revenue focus
D) environmental focus
E) education focus

Question 40

Globalization of the location decision is the result of all of the following except

A) market economics
B) higher quality of labor overseas
C) ease of capital flow between countries
D) high differences in labor costs
E) more rapid, reliable travel and shipping

Question 41

Which of the following is the best example of the proximity rule that, for service firms, proximity to market is the most important location factor?

A) Soft drinks are bottled in many local plants, where carbonated water is added to proprietary syrups that may have been shipped long distances.
B) Few people will travel out-of state for a haircut.
C) Patients will travel very long distances to have their hernia surgeries performed at Shouldice Hospital.
D) Furniture makers choose to locate near the source of good hardwoods, even though it means locating near other furniture manufacturers.
E) Metal refiners (smelters) locate near mines to accomplish significant weight reduction near the metal's source.

Question 42

Intangible costs include which of the following?

A) quality of prospective employees
B) quality of education
C) availability of public transportation
D) all of the above
E) none of the above

Question 43

A clothing chain is considering two different locations for a new retail outlet. They have identified the four factors listed in the following table as the basis for evaluation, and have assigned weights as shown on the left. The manager has rated each location on each factor, on a 100-point basis, as shown on the right. What is the score for Chester?

A) 10.00
B) 24.50
C) 25.75
D) 27.00
E) 100.00

Question 44

An approach to location analysis that includes both qualitative and quantitative considerations is

A) locational cost-volume
B) factor-rating
C) transportation model
D) assignment method
E) make or buy analysis

Question 45

Which of these factors would be considered when making a location decision at the region/community level?

A) government rules, attitudes, stability, incentives
B) cultural and economic issues
C) zoning restrictions
D) environmental impact issues
E) proximity to raw materials and customers

Question 46

Which of the following statements regarding "proximity" in the location decision is false?

A) Service organizations find that proximity to market is the most critical primary location factor.
B) Manufacturers want to be near customers when their product is bulky, heavy, or fragile.
C) Perishability of raw materials is a good reason for manufacturers to locate near the supplier, not the customer.
D) Reduction in bulk is a good reason for a manufacturer to locate near the supplier.
E) Clustering among fast food chains occurs because they need to be near their labor supply.

Question 47

A manufacturing firm finds a location that has a significant cost advantage over alternatives, but rejects that location because the educational infrastructure was insufficient to train the firm's workers in its special production technologies. The firm's action illustrates the link between __________ and location.

A) innovation
B) clustering
C) tax incentives
D) globalization
E) proximity

Question 48

Evaluating location alternatives by comparing their composite (weighted-average) scores involves

A) factor-rating analysis
B) cost-volume analysis
C) transportation model analysis
D) linear regression analysis
E) crossover analysis

Question 49

Community attitudes, zoning restrictions, and quality of labor force are likely to be considered in which of the following location decision methods?

A) transportation method
B) locational break-even analysis
C) center-of-gravity method
D) simulation
E) factor-rating method

Question 50

When making a location decision at the region/community level, which of these would be considered?

A) government rules, attitudes, stability, incentives
B) cultural and economic issues
C) cost and availability of utilities
D) zoning restrictions
E) air, rail, highway, waterway systems

Question 51

On the crossover chart where the costs of two or more location alternatives have been plotted, the quantity at which two cost curves cross is the quantity at which

A) fixed costs are equal for two alternative locations
B) variable costs are equal for two alternative locations
C) total costs are equal for all alternative locations
D) fixed costs equal variable costs for one location
E) total costs are equal for two alternative locations

Question 52

Which of these factors would be considered when making a location decision at the site level?

A) government rules, attitudes, stability, incentives
B) cultural and economic issues
C) zoning regulations
D) cost and availability of utilities
E) proximity to raw materials and customers

Question 53

Tangible costs include which of the following?

A) climatic conditions
B) availability of public transportation
C) taxes
D) quality and attitude of prospective employees
E) zoning regulations

Question 54

Operations managers will need to consider ethical and social responsibility issues when location decisions involve

A) child labor issues
B) sweatshop conditions
C) allegiance to the firm's current location
D) corruption
E) all of the above

Question 55

Which of the following is usually not one of the top considerations in choosing a country for a facility location?

A) availability of labor and labor productivity
B) exchange rates
C) attitude of governmental units
D) zoning regulations
E) location of markets

Question 56

Which of the following methods best considers intangible costs related to a location decision?

A) crossover methods
B) locational break-even analysis
C) factor-rating analysis
D) the transportation method
E) the assignment method

Question 57

A firm is seeking a new factory location, and is considering several countries worldwide. In some of these countries, child labor is prevalent; in others, working conditions and worker safety are inferior to conditions in the U.S. An operations manager paying attention to __________ will factor these issues into the location decision.

A) ethical and social responsibility issues
B) key success factors
C) factor-rating systems
D) geographic information systems
E) regression models

Question 58

Which of the following worker characteristics would likely be least important for U.S. firms looking to open up call centers in different countries?

A) willing to accept low wages
B) have a high level of education
C) speak English
D) possess an in-depth knowledge of American popular culture
E) are young

Question 59

A full-service restaurant is considering opening a new facility in a specific city. The table below shows its ratings of four factors at each of two potential sites. The score for Gary Mall is __________ and the score for Belt Line is __________.

A) 120; 120
B) 22; 24
C) 18; 120
D) 34; 28
E) none of the above

Question 60

When making a location decision at the country level, which of these would be considered?

A) corporate desires
B) land/construction costs
C) air, rail, highway, waterway systems
D) zoning restrictions
E) location of markets

Question 61

East Texas Seasonings is preparing to build one processing center to serve its four sources of seasonings. The four source locations are at coordinates shown below. Also, the volume from each source is provided. What is the center of gravity?

A) X = 28.125; Y = 31.25
B) X = 22000; Y = 24000
C) X = 27.5; Y = 40
D) center of gravity = 28
E) none of the above

Question 62

Production and transportation costs are always considered in which of the following location decision methods?

A) traffic counts
B) transportation method
C) purchasing power
D) proximity of markets
E) clustering

Question 63

LaQuinta Motor Inns has a competitive edge over its rivals because it

A) uses regression analysis to determine which variables most influence profitability
B) picks better locations than its rivals
C) picks larger locations than its rivals
D) builds only along interstate highways
E) all of the above

Question 64

Which of the following is most likely to affect the location decision of a service firm rather than a manufacturing firm?

A) energy and utility costs
B) attitude toward unions
C) parking and access
D) cost of shipping finished goods
E) labor costs

Question 65

Traffic counts and demographic analysis of drawing areas are associated with

A) the center-of-gravity method
B) manufacturing location decisions
C) service location decisions
D) the transportation method
E) none of the above

Question 66

The transportation method, when applied to location analysis

A) minimizes total fixed costs
B) minimizes total production and transportation costs
C) minimizes total transportation costs
D) maximizes revenues
E) minimizes the movement of goods

Question 67

Which of the following is a location analysis technique typically employed by a service organization?

A) purchasing power analysis
B) linear programming
C) queuing theory
D) crossover charts
E) cost-volume analysis

Question 68

A regional bookstore chain is about to build a distribution center that is centrally located for its eight retail outlets. It will most likely employ which of the following tools of analysis?

A) assembly line balancing
B) load-distance analysis
C) center-of-gravity model
D) linear programming
E) all of the above

Question 69

What describes a system that stores and displays information that can be linked to a geographic location?

A) AIS
B) LOC
C) GLOC
D) LIS
E) GIS

Question 70

A county wants to build one centrally-located processing facility to serve the county's four recycling drop-off locations. The four drop-offs have characteristics as given in the table below. What is the approximate center of gravity of these four locations?

A) 4.75, 6.04
B) 17, 24
C) 33.5, 135.4
D) 6, 4.25
E) 570, 725

Question 71

Which of the following is not among the eight determinants of revenue and volume for a service firm?

A) quality of the management
B) shipment cost of finished goods
C) purchasing power of the customer-drawing area
D) uniqueness of the firm's and the competitor's locations
E) competition in the area

Question 72

The center-of-gravity method does not take into consideration the

A) location of markets
B) volume of goods shipped to the markets
C) value of the goods shipped
D) combination of volume and distance
E) center-of-gravity method considers none of the above

Question 73

A firm is considering two location alternatives. At location A, fixed costs would be $4,000,000 per year, and variable costs $0.30 per unit. At alternative B, fixed costs would be $3,600,000 per year, with variable costs of $0.35 per unit. If annual demand is expected to be 10 million units, which plant offers the lowest total cost?

A) Plant A, because it is cheaper than Plant B for all volumes over 8,000,000 units.
B) Plant B, because it is cheaper than Plant A for all volumes over 8,000,000 units.
C) Plant A, because it is cheaper than Plant B for all volumes.
D) Plant B, because it has the lower variable cost per unit.
E) Neither Plant A nor Plant B, because the crossover point is at 10 million units.

Question 74

Location analysis techniques typically employed by service organizations include

A) factor rating method
B) center-of-gravity method
C) purchasing power analysis of area
D) traffic counts
E) all of the above

Question 75

Which of the following is among the eight determinants of revenue and volume for a service firm?

A) uniqueness of the firm's and the competitor's locations
B) quality of the competition
C) quality of management
D) purchasing power of the customer-drawing area
E) all of the above

Question 76

Traffic counts and purchasing power analysis of drawing area are techniques associated with

A) locational break-even analysis
B) a manufacturing location decision
C) a retail or professional service location decision
D) the factor rating method
E) the transportation method

Question 77

Which of the following statements regarding Starbucks Coffee is false?

A) The firm plans to open three new cafes per day around the world.
B) The firm uses GIS to evaluate every site decision.
C) The firm's cafes are exclusively in traditional settings: malls, tourist areas, and airports.
D) The firm places cafes into ever more innovative locations.
E) The firm put cafes in Japan, even though that country had no GIS data available.

Question 78

Which of the following is a location analysis technique typically employed by a manufacturing organization?

A) transportation method
B) queuing theory
C) correlation analysis and traffic counts
D) simulation
E) demographic analysis

Question 79

The center-of-gravity method is used primarily to determine what type of locations?

A) service locations
B) manufacturing locations
C) distribution center locations
D) supplier locations
E) call center locations

Question 80

A jewelry store is more likely than a jewelry manufacturer to consider __________ in making a location decision.

A) transportation costs
B) cost of raw materials
C) parking and access
D) climate
E) taxes