Deck 8: Location Strategies

Question 1

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

A)the city is in the center of the United States,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.

Answer 1

E

Question 2

Why does FedEx use a central hub airline network,rather than a "point-to-point" network? Describe FedEx's approach to choosing its superhub.

Answer 2

The hub system is more centralized,and allows for greater control;greater control reduces package mishandling and transit delays.Also,the hub permits service to a far greater number of points with fewer aircraft than a point-to-point network would.Their U.S.hub in Memphis reflects a need to be geographically centralized,and in a location where schedules can more reliably be kept because weather delays are minimized.

Question 3

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

Answer 3

D

Question 4

State the fundamental objective of a firm's location strategy.How is this basic objective carried out by industrial or goods-producing firms;how does that differ for service firms?

Question 5

A location decision for a traditional department store (e.g. ,Macy's)would tend to have what type of focus?

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

Question 6

FedEx schedules its aircraft using a(n)________ system,which it credits with reducing package mishandling and delay in transit.

Question 7

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

Question 8

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 United States,but a city-to-city network in other countries.
E)Memphis is FedEx's only hub airport in the United States.

Question 9

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 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

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

Question 15

As described in the book Aerotropolis,nowadays location decisions worldwide are often being based on what?

A)rivers
B)rail hubs
C)interstate highways
D)ports
E)airports

Question 16

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

Question 17

A location decision for an appliance manufacturer would tend to have what type of focus?

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

Question 18

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

Question 19

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 20

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

Question 21

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 22

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 23

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 24

Political risk,cultural issues,and exchange rates are among those ________ that affect which country will be selected for a location decision.

Question 25

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 26

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

A)$90
B)$5
C)$6
D)$0.167
E)$1,350

Question 27

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 28

Globalization of the location decision is the result of all EXCEPT which of the following?

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 29

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 30

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

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

Question 31

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 32

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 33

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 34

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 35

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 36

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 37

________ costs are readily identifiable and can be measured with precision.

Question 38

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 39

________ 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 40

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 41

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 cost-volume analysis
C)center-of-gravity method
D)simulation
E)factor-rating method

Question 42

Identify five factors that have fostered globalization.

Question 43

What is it called when competing companies locate next to each other? Why do they do this?

Question 44

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

A)crossover methods
B)locational cost-volume analysis
C)factor-rating method
D)the transportation method
E)center-of-gravity method

Question 45

Evaluating location alternatives by comparing their composite (weighted-average)scores involves which of the following?

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

Question 46

"Proximity" or closeness implies that a firm should locate "close" to something.What are the three kinds of proximity described in the text? What are the basic conditions under which each is appropriate? What kinds of firms are likely to use each of these?

Question 47

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

Question 48

What is the impact of exchange rates on location decisions?

Question 49

What is an approach to location analysis that includes both qualitative and quantitative considerations?

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

Question 50

Why is "quality of life" an element of intangible costs associated with location decisions? Provide an example as part of your discussion.

Question 51

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

Question 52

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 53

Identify five factors that affect location decisions at the site level.

Question 54

________ occurs when competing companies locate near each other because of a critical mass of information,talent,venture capital,or natural resources.

Question 55

Labor cost per unit is also referred to as ________.

Question 56

What is the role of labor productivity in location decisions?

Question 57

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 58

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

Question 59

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.The manager has rated each location on each factor,on a 100-point basis,as shown under the respective columns for Barclay and Chester. What is the score for Chester?

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

Question 60

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 of the locations.
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 61

The ________ is a mathematical technique used for finding the best location for a single distribution point that services several stores or areas.

Question 62

A manufacturing company is considering two alternative locations for a new facility.The fixed and variable costs for the two locations are found in the table below.For which volume of business would the two locations be equally attractive? If the company plans on producing 50,000 units,which location would be more attractive?

Question 63

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 64

A farmers' cooperative association plans to build a new sugar mill in Southwestern Louisiana.The primary objective of the mill is to provide the farmers with a place to take their crop for processing that will reduce their transportation costs.The members of the co-op believe that the center-of-gravity method is appropriate for this objective.While there are over 200 sugar cane farms in the region,they are tightly clustered around six villages.Using the data below,use the center-of-gravity method to calculate the coordinates of the best location for this mill.All mileage references use the city of Lake Charles as (0,0).

Question 65

A clothing chain is considering two different locations for a new retail outlet.The organization has identified the four factors listed in the following table as the basis for evaluation,and it has assigned weights as shown.The manager has rated each location on each factor,on a 100-point basis (higher scores are better),as shown under the respective columns for Barclay and Chester.
a.Calculate the composite score for each alternative location.
b.Which site should be chosen?
c.Are you concerned about the sensitivity and subjectivity of this solution? Comment.

Question 66

The transportation model,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

What are the advantages and disadvantages of the use of the factor-rating method?

Question 68

What kinds of location decisions are appropriate for the use of center-of-gravity analysis? What variable is being optimized in this analysis?

Question 69

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.
a.Calculate the volume-weighted center of gravity.
b.Calculate the simple center of gravity (all cities weighted equally).
c.Explain why the two calculations differ.

Question 70

The ________ method is popular because a wide variety of factors,from education to recreation to labor skills,can be objectively included.

Question 71

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)X = 25;Y = 40

Question 72

A manufacturing company preparing to build a new plant is considering three potential locations for it.The fixed and variable costs for the three alternative locations are presented below.
a.Complete a numeric locational cost-volume analysis.
b.Indicate over what range each of the alternatives A,B,C is the low-cost choice.
c.Is any alternative never preferred? Explain.

Question 73

The ________ is used to determine the best pattern of shipments from several points of supply to several points of demand.

Question 74

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 75

A regional bookstore chain wants 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 method
D)linear programming
E)locational cost-volume analysis

Question 76

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

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

Question 77

What kinds of location decisions are appropriate for the use of locational cost-volume analysis? Write a brief paragraph explaining how the method can assist an operations manager in choosing among alternative sites in making a location decision.

Question 78

Identify the four major quantitative methods for solving location problems.

Question 79

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 80

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)