Importance of location when implementing an international strategy

Therefore, location has become a strategic factor associated with the formation of a manufacturing unit. Ideally, as the complexity of the environment in which businesses operate increases and competition becomes global, the ability to manage a cohesive global system has become an increasingly significant role for managers. International business managers have come to the realization that identifying the right location is a crucial component for business success (Aswathappa, 2005). If a firm selects a wrong location, then chances are high it will suffer from inadequate access to customers, labor, transportation and resources among other important factors (Gigerich, 2015). Also, a firm’s location often plays a significant role in its profitability and overall success. Nations that enjoy large, low-cost grants of a factor of production will attract businesses in need of such factor of production (Hill, 2008).

However, the current trend existing in the business environment concerns physical proximity between suppliers and consumers to minimize suppliers lead time. Due to this decision, most firms in the U. S are already reconsidering decisions to locate their businesses offshore. Also, the beauty of a country as a site of location depends on its infrastructure which includes transportation, building materials, and equipment, water, electricity, telephone, medical care, housing, education and entertainment among other services (Hill, 2008). Products such as pharmaceuticals and electronic components have a high value to weight ratio because they are costly and weigh less and even if they were to be dispatched halfway across the globe, their transportation would account for a very small fraction of the total cost (Hill, 2008).

Companies would be pressurized to produce these goods at an ideal location and serve the global market from there. Contrarily, heavy items such as iron, cement and agricultural products among other bulky goods would exhibit a less value when compared to the weight and thus would be produced in several places to minimize the cost of transportation. Products such as personal computers and calculators which serve universal needs may also influence location decisions in that they can reduce the local responsiveness requirement which ultimately increases the attractiveness of focusing manufacturing at an ideal site. In addition to the above factors, government policies and organizational issues also affect international location decisions that global managers must first evaluate before making a final decision on their business location.

S, Malaysia and the Philippines to benefit from the low cost of resources in these areas (Aswathappa, 2005). The bottom-line, in this case, is that firms entering into international investments are establishing location strategies that must their organizational needs and objectives to maximize profits and minimize losses as well as gain competitiveness. Literature Review It is becoming progressively essential for businesses to include all the alternative factors affecting international location decisions in their global strategy. Even when the firm’s facility will be located locally, there is a need to incorporate the local, technological, economic, political and environmental advantages from local innovations and partnership with local suppliers and customers. The correct location decision can help a firm to become competitive and improve its performance in the short and long terms (Siedschlag et al.

The confidences obtained in the local markets can be extended in the international markets. A firm’s decision to establish its location in a gathering where there is high demand for goods and services can assist such a company to better understand its competitive market (Baum and Haveman, 1997). Furthermore, the supposed cost of merging resources established domestically with those of a overseas is thought to encourage foreign direct investment particularly when the cost of transfering the operation to foreign nations may minimize the cost a firm incurs when operating in local markets (Porter, 2000). Since the reduction of operational cost allows a company to improve its profitability, exploiting strategic international locations or markets to exploit lower cost becomes a stimulus for internationalizing a firm (Laulajainen and Stafford, 2013).

However, successful internationalization of a firm’s project will only become successful when the location selected well-suits the organization’s plans. Investing in an area flooded with competitors is never the best means of successfully internationalizing. However, businesses still tend to prefer entering into areas where competitors exist rather than being first entrants (McIvor, 2013). Ideally, to understand this phenomenon of location choice consideration during internationalization, location theories have been used to help managers understand the reality of this concept. From location theories perspective, it stands that similar types of businesses tend to cluster together. For instance, in New York or London, it is very easy to locate a designer store, restaurant, theater, and jewelers. Also, the various factors of the home country such as infrastructure, culture and resource availability also influence international market location process.

Often, the market selection is limited by the product mix, the pattern of competition, the minimum level of demand needed and the various distribution requirements. However, there are instances in which opportunities may supersede growth (Verbeke, 2013). In such instances, a firm’s decision of a location choice must be based on the corporation’s strategy, organizational culture as well as goals and objectives to make sense. In most cases, a firm’s product mix is often established even before the decision on market or business location; however, after the market selection has been made, the probability of modifying the product mix is often high (Verbeke, 2013). Summarily, therefore, the factor of location should be carefully investigated before a business decides to venture into internationalization because it directly influences a firm’s productivity and its ultimate competitive advantage in the highly competitive global market.

References Anon, 2009. Clustering.  The Economist. Available at: https://www. Love thy neighbor? Differentiation and agglomeration in the Manhattan hotel industry, 1898–1990. Administrative Science Quarterly, 42(2): 304–338. Craig, W. Why Location Does (And Doesn't) Matter for Entrepreneurial Success.  Forbes. , Gilbert, B. A. and McDougall, P. P. International entrepreneurship and geographic location: an empirical examination of new venture internationalization.  Area Development. Available at: http://www. areadevelopment. com/LocationUSA/2015-US-inward-investment-guide/international-location-decision-issues-to-consider-2727261. shtml [Accessed June 2, 2018]. Springer Science & Business Media. Lo, F. Y. , Mahoney, J. T.  Journal of Supply Chain Management, 49(2), pp. Porter, M. E. 1990, The Competitive Advantage of Nations. The Macmillan Press Ltd. Siedschlag, I. , Smith, D. , Turcu, C. , and Zhang, X. What determines the location choice of R&D activities by multinational firms? Research Policy, 42(8), pp. Verbeke, A.