Agriculture Reference
In-Depth Information
residential density are important sales indicators and thus infl uence location decisions. For
example, most people shop at the supermarkets located on the way home from work or at
grocery stores within two miles of their homes.
Location of competitor stores can also be an important consideration for service fi rms — a
new supermarket located near a new housing development and away from competitors may
provide a distinct competitive advantage for that fi rm. In contrast, it is interesting to note that
locating near competitors can sometimes be advantageous as well. A greater number of total
customers (or a
critical mass
) may be attracted to a group of stores clustered in one location
versus the total number of customers who would stop at the same stores at scattered loca-
tions. A cluster of fast food restaurants off an interstate exit typically produces a critical
mass.
A restaurant chain with operations in North America and Japan considers six primary
factors when determining the location of a quick service (fast food) restaurant:
1.
Area employment
2.
Retail activity
3.
Proximity to successful competitors
4.
Traffi c fl ow
5.
Residential density
6.
Accessibility and visibility
Area employment
is important because the chain is targeting 20- to 45-year-old workers on
lunch breaks. The chain also confi rms that area fi rms allow workers to take lunch breaks off
premises.
Retail activity
, the second factor, is important because a lot of quick service eating
is done on impulse by shoppers. Being near successful competitors is seen as an advantage
because they signal that the area is a good market.
Traffi c fl ows
are also important because
most business is from people in cars. In fact, traffi c fl ow of 16,000 cars every 24 hours is
considered good. A
residential population
of about 20,000 upper-middle-class residents
within a two-mile radius is considered to be adequate to ensure weekend and evening
business. Finally,
accessibility and visibility
are also important factors in considering loca-
tion. Specifi cally, traffi c direction, intersections, traffi c backups during rush hour, and sur-
rounding buildings and signs are important accessibility and visibility factors that are
considered.
Capacity planning
Capacity planning
includes the activities that are undertaken to determine what the appro-
priate size of a manufacturing plant or service location should be, so that a certain quantity
can be produced over a specifi c time-period. A food or agribusiness fi rm must balance the
cost of having excess capacity against the potential of lost sales due to too little capacity. If
not anticipated correctly, lost sales and disappointed customers may have serious effects on
a fi rm's short-term and long-term profi tability. Accurate forecasts of present and future
demand are critical in capacity planning. Thus, an understanding of the product life cycle
sidered in determining the appropriate capacity, fi ve of which are detailed here:
1.
Economies of scale
2.
Flexibility
