Factors affecting location decisions in international operations – a Delphi study
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MacCarthyAtthirawongDELPHIInt.Manuf.IJOPM2003rg
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See discussions, stats, and author profiles for this publication at: https://www.researchgate.net/publication/241701935 Factors affecting location decisions in international operations – a Delphi study Article in International Journal of Operations & Production Management · July 2003 DOI: 10.1108/01443570310481568 CITATIONS 390 READS 65,995 2 authors: Some of the authors of this publication are also working on these related projects: Manufactoring Supply Networks View project Managing Product Variety in International Supply Chains View project Bart MacCarthy University of Nottingham 139 PUBLICATIONS 3,832 CITATIONS SEE PROFILE Walailak Atthirawong King Mongkut's University of Technology North Bangkok 31 PUBLICATIONS 502 CITATIONS SEE PROFILE All content following this page was uploaded by Bart MacCarthy on 22 November 2015. The user has requested enhancement of the downloaded file. Factors affecting location decisions in international operations – a Delphi study B.L. MacCarthy Operations Management Group, University of Nottingham, Nottingham, UK, and W. Atthirawong Department of Mathematics and Computer Science, King Mungkut’s Institute of Technology Ladkrabang, Bangkok, Thailand Keywords International business, Location, Delphi method Abstract Only a limited amount of research has been reported on factors influencing international location decisions for contemporary manufacturing operations. In this paper a comprehensive set of factors that may influence international location decisions is identified from an analysis of the existing literature. Results are presented from a Delphi study that used a worldwide panel of experts to investigate factors affecting international location decisions. Findings are reported on the motivations of firms in seeking to manufacture across national borders and the key steps that should be followed in making international location decisions. The top five major factors identified that may strongly influence international location decisions generally were: costs, infrastructure, labour characteristics, government and political factors and economic factors. Ten key sub-factors identified were: quality of labour force, existence of modes of transportation, quality and reliability of modes of transportation, availability of labour force, quality and reliability of utilities, wage rates, motivation of workers, telecommunication systems, record of government stability and industrial relations laws. Additional sub-factors of increasing importance include: protection of patents, availability of management resources and specific skills and system and integration costs. The factors identified have implications for management practice, for policy-making by governments and other agencies and for academic research in international operations. Introduction Making location decisions for the production of products is a key aspect of strategic and logistical decision-making for manufacturing firms. The optimum locations may offer competitive advantage and may contribute to the success of an enterprise. The number of firms considering location on a worldwide basis continues to increase (Flaherty, 1996). A very wide range of factors may potentially influence firms in deciding to locate production The authors are most grateful to all the panellists who participated in the study and the six academics and two industrialists for their valuable comments on an earlier pilot study. Because of length restrictions, the questionnaires have not been included here but are available from the authors – bart.macarthy@nottingham.ac.uk, kawalail@kmitl.ac.th. or awarawut@ksc. th.com. In fact the questions and their form can be inferred from the questionnaire section of the paper and the sub-headings in the results section. 794 International Journal of Operations & Production Management Vol. 23 No. 7, 2003 pp. 794-818 facilities across national boundaries. A great deal of attention has been paid in the research literature to critical factors in industrial location decisions for over a century (Jungthirapanich and Benjamin, 1995). However, the literature specifically on international location decisions is more limited. Only a limited amount of research has been reported that discusses the factors recognised, and considered in practice, in international location decisions (Badri et al., 1995; Eenennaam and Brouthers, 1996; Atthirawong and MacCarthy, 2001). The study reported here addresses this gap in knowledge on international location decisions. In this paper, we identify from the literature a comprehensive set of factors and sub-factors that may influence international location decisions. We then present the results of a Delphi study carried out to examine the motivations for international location decisions and the relative importance of different factors in influencing international location decisions. A worldwide panel of experts that included academics, representatives from government bodies and consultants participated in the study. The results and implications of the study for international location decisions are discussed. In the next section, factors and sub-factors affecting international location decisions are identified and this is followed by a description of the Delphi process. The results of the Delphi study are then presented and their implications discussed. Factors relevant to international location decisions Factors influencing international location decisions are discussed by Badri et al. (1995), Hoffman and Schniederjans (1994) and Canel and Khumawala (1996). Jungthirapanich and Benjamin (1995) provide a chronological summary of research studies undertaken between 1875 to 1990 on general industrial location, revealing that, frequently in the past, a limited number of quantitative factors such as transportation and labour costs were considered when firms made a location decision, but that more recently an increasingly wide range of both qualitative and quantitative factors have been evident. Costs are a major consideration in many international location decisions and there may be trade-offs between different types of costs. Qualitative issues such as social and political factors are also influential in many international location decisions. A survey conducted by Badri et al. (1995) indicates that global competition and economic-related factors are more notable than conventional location factors such as transportation costs and climate when firms decide to do business abroad. A number of factors such as financial incentives and tax structure may be influenced or controlled by host governments and such factors will vary from country to country. The importance of the various factors may change significantly over time (Epping, 1982). Location factors can be considered and classified in a variety of ways (Lee and Franz, 1979; Epping, 1982; Sule, 1994; Evans et al., 1990; Nahmias, 1993; 795 Hoffman and Schniederjans, 1994; Barkley and McNamara, 1994; Burnham, 1994; Badri et al., 1995; Chase and Aquilano, 1995; Dilworth, 1996; Badri, 1996; Russell and Taylor, 1998; Dorneir et al., 1998; Badri, 1999). A detailed study of the literature was made to identify a fully comprehensive set of factors and sub-factors that are potentially relevant to international location decisions (Atthirawong and MacCarthy, 2000; MacCarthy and Atthirawong, 2001). These factors are summarised in Table I. There are 13 major factors identified. For each major factor a set of specific sub-factors are identified. This Table of factors and sub-factors covers both quantitative and qualitative aspects relevant to location decisions and includes operational, strategic, economic, political, social and cultural dimensions. This comprehensive set of factors and sub-factors is used in the Delphi study described in the next section. A number of techniques have been advocated in the literature to aid location decision making (Brandeau and Chiu, 1989; Sule, 1994; Revelle and Laporte, 1996; Hayter, 1997). The work reported in this paper focuses on understanding the factors that are motivating and influencing international location decisions more generally and hence a research tool – the Delphi approach – capable of eliciting expert information is used. This approach is described below. The Delphi approach A Delphi study is a systematic, iterative process to elicit a consensus view from a panel of experts. The approach is often used as a qualitative forecasting technique but is also used to investigate and understand the factors that influence or may influence decision-making on a specific issue, topic or problem area. A single opinion may be incorrect, misinformed or tend to a narrow view. The Delphi approach uses a representative group of experts to generate a more accurate and more informed response than is obtainable from one individual. The method is different from brainstorming or other group approaches in that it avoids group interactions of individuals, which may result in induced responses. The approach helps to reduce the influence of dominant individuals and to develop a consensus of expert opinion on subjective issues (Ray and Sahu, 1990; Azani and Khorramshahgol, 1990; Klassen and Whybark, 1994; Green and Price, 2000). An important feature of the Delphi approach is the reporting of divergent opinions in the absence of full consensus. The Delphi method was employed originally in the early of 1950s using military experts to estimate the likelihood of the effects of an atomic bombing (Linstone and Turoff, 1975; Benson et al., 1982). Since then its usefulness has been demonstrated in a range of areas outside of defence applications including forecasting (Lynch et al., 1994), strategic planning (Iverson and Jorgensen, 1986; Ray and Sahu, 1990; McKnight et al., 1991) and supply chain strategy (Harland et al., 1999). In operations and production management disciplines, Ray and Sahu (1990) employ the Delphi technique in investigating productivity management in India. Klassen and Whybark (1994) apply the Delphi method to 796 Major factors Sub-factors Costs Fixed costs; transportation costs; wage rates and trends in wages; energy costs; other manufacturing costs; land cost; construction/leasing costs and other factors (e.g. R&D costs, transaction and management costs etc.) Labour characteristics Quality of labour force; availability of labour force; unemployment rate; labour unions; attitudes towards work and labour turnover; motivation of workers and work force management Infrastructure Existence of modes of transportation (airports, railroads, roads and sea ports); quality and reliability of modes of transportation; quality and reliability of utilities (e.g. water supply, waste treatment, power supply, etc.) and telecommunication systems Proximity to suppliers Quality of suppliers; alternative suppliers; competition for suppliers; nature of supply process (reliability of the system) and speed and responsiveness of suppliers Proximity to markets/customers Proximity to demand; size of market that can be served/potential customer expenditure; responsiveness and delivery time to markets; population trends and nature and variance of demand Proximity to parent company’s facilities Close to parent company Proximity to competition Location of competitors Quality of life Quality of environment; community attitudes towards business and industry; climate, schools, churches, hospitals, recreational opportunities (for staff and children); education system; crime rate and standard of living Legal and regulatory framework Compensation laws; insurance laws; environmental regulations; industrial relations laws; legal system; bureaucratic red tape; requirements for setting up local corporations; regulations concerning joint ventures and mergers and regulations on transfer of earnings out of country rate Economic factors Tax structure and tax incentives; financial incentives; custom duties; tariffs; inflation; strength of currency against US dollar; business climate; country’s debt; interest rates/exchange controls and GDP/GNP growth, income per capita Government and political factors Record of government stability; government structure; consistency of government policy; and attitude of government to inward investment Social and cultural factors Different norms and customs; culture; language and customer characteristics Characteristics of a specific location Availability of space for future expansion; attitude of local community to a location; physical conditions (e.g. weather, close to other businesses, parking, appearance, accessibility by customers etc.); proximity to raw materials/resources; quality of raw materials/resources and location of suppliers 797 Table I. Summary of major criteria and sub-factors affecting international location decisions identify the key barriers in the management of international operations. Green and Price (2000) have speculated on the future direction of facilities management using a Delphi panel in the UK. An application using Delphi concerning location planning is reported by Azani and Khorramshahgol (1990). The Delphi method uses a panel of experts who have experience and/or knowledge of the subject being studied. Hence the panel is not generally selected randomly. Benson et al. (1982) and Tavana et al. (1996) note that the Delphi method comprises three particular features: (1) anonymity among the panel of experts; (2) obtaining a statistical group response from a well-designed questionnaire; and (3) controlled feedback. The panel of experts must be selected carefully. It should comprise a group of people who are both familiar with, and knowledgeable on the problem domain being considered and they should be mutually anonymous. The panel is then asked to respond to a questionnaire. All questionnaire responses and comments are combined and analysed in order to statistically collate and summarise the results for another round of the process. An interim report is sent back to panellists summarising the group response. This iterative process may be continued further until consensus and/or clarity is produced. Finally the results from the process are reported. A key part of the process is designing the questionnaire. The methodology used for this study The pilot study A questionnaire was developed based around the factors and sub-factors presented in Table I. It was first pre-tested with a number of colleagues to check for clarity and consistency and appropriate changes were made. Then a proper pilot study of the questionnaire was conducted with eight people who had knowledge of international location problems in order to provide comments and feedback. An international conference provides a good opportunity to elicit views from delegates with a range of expertise from a number of countries. Six academics and two industrialists attending the International Conference for Production Research (ICPR2000 in Thailand, 2-4 August, 2000) were selected and Download 0.71 Mb. Do'stlaringiz bilan baham: |
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