978-0132921145 Chapter 8 Part 2

118 CHAPTER 8 LO C A T I O N ST R A T E G I E S

8.25 (a) Weighted scores:

British International Airways

Milan

Rome

Genoa

Paris

Lyon

Nice

3,415

2,945

3,425

3,155

3,970

3,660

Munich

Bonn

Berlin

3,425

3,915

3,665

So, for part (a) the top three cities become: Lyon is best (3,970),

A

B

C

Rent

Walk-in

Distance

8.27

9 9 6 8 2 5 8 5 2 4

Downtown rating 6.03

31

7 9 6 8 5 5 4 5 9 4

Suburb A rating 6.19

31

6 9 8 8 6 5 5 5 6 4

Suburb B rating 6.35

31

 +  +  +  + 

==

 +  +  +  + 

==

 +  +  +  + 

==

Suburb B has the highest rating, but weights should be examined

120 CHAPTER 8 LO C A T I O N ST R A T E G I E S

1

8.34 With weights given, the result became:

Spain 2.55

England 3.55

Italy 3.30

3. Evaluate the reasons cited by Mr. O’Brian for relocation.

Are they justifiable?

Matters of economics are certainly justifiable reasons to relo-

cate. If a firm can generate more revenue, operate more effi-

4. What responsibilities does a firm have to its employees when

a decision to cease operations is made?

Whenever the management of a firm decides to cease opera-

tions in a given location, it has the responsibility to aid its

mendations. In addition, the employer has a responsibility to

notify its employees of the decision as soon as it has been

finalized in order to give each worker ample time to find

employment elsewhere. Finally, severance pay should be

considered in an attempt to alleviate financial hardships on

workers who have been unsuccessful in their attempts to find

employment elsewhere. If the company has more than 500

employees, closing to avoid unionization is illegal.

VIDEO CASE STUDIES

LOCATING THE NEXT RED LOBSTER RES-

TAURANT

1. MapInfo has 72 clusters that provide socioeconomic profiling.

3. Darden has shied away from urban locations; high location

costs do not fit its current model, but Darden has found fertile

ground in first- and second-tier suburban and exurban/small (over

90% of the Red Lobsters are in these three density classes). Inci-

lects and analyzes about each site. As such, it provides the answer

to the first question.

2. The ratings of the four cities are

A = 80.5, B = 64.5, C = 71.5, and D = 79.5. So City A is a close

first choice over City D. In reality, they are so close that other

3. Expansion is the lifeblood of any global organization. Good

decisions mean a 10– to 20–year cash flow. Bad ones mean a

10-plus year commitment to a money-losing location.

4. Hard Rock considers political risk, crime, currency, and other

factors in location decisions abroad. In Russia and Colombia,

corruption is so endemic that having a local partner who can

understand and handle these issues is a necessity.

1. The five factors appear reasonable. Many others could be

included, such as potential parking or concession revenue, park-

ing, and long-term potential.

2. Option 1 Expand y = $1,000,000 + $1x

1. Identify comparable existing HRC markets

2. Explain similarities (e.g. regional population, visitors,

hotel rooms, seasonality, etc.)

3. Prepare city P&L spreadsheet analysis

Conclusion

1. Estimate of Gross Food & Beverage Revenue for

market in General with backup and comparables

2. Estimate of Gross Merchandise Revenue for market

in General with backup and comparables

122 CHAPTER 8 LO C A T I O N ST R A T E G I E S

Option 2 New stadium y = $5,000,000 + $2x

Option 3 Rent y = $1,000,000 + $750,000 + $1x



3. Based on the survey data, rating “comfort” and “national

image” as 1s, “convenience” as a 2, and “cost” and “guaranteed

availability” as 4s, the results (using A = 4, B = 3, C = 2, D = 1,

4. The expansion of the existing stadium appears preferable

even at annual attendance of 500,000 fans.

5. Gardner used the factor rating method to rate the constituency

responses. This was appropriate for evaluating the qualitative

values. He should consider weighting the criteria as the admin-

*This is the solution to the case that appears on our Web sites www.pearsonhighered.com/heizer and www.myomlab.com.

120 CHAPTER 8 LO C A T I O N ST R A T E G I E S

1

8.34 With weights given, the result became:

Spain 2.55

England 3.55

Italy 3.30

3. Evaluate the reasons cited by Mr. O’Brian for relocation.

Are they justifiable?

Matters of economics are certainly justifiable reasons to relo-

cate. If a firm can generate more revenue, operate more effi-

4. What responsibilities does a firm have to its employees when

a decision to cease operations is made?

Whenever the management of a firm decides to cease opera-

tions in a given location, it has the responsibility to aid its

mendations. In addition, the employer has a responsibility to

notify its employees of the decision as soon as it has been

finalized in order to give each worker ample time to find

employment elsewhere. Finally, severance pay should be

considered in an attempt to alleviate financial hardships on

workers who have been unsuccessful in their attempts to find

employment elsewhere. If the company has more than 500

employees, closing to avoid unionization is illegal.

VIDEO CASE STUDIES

LOCATING THE NEXT RED LOBSTER RES-

TAURANT

1. MapInfo has 72 clusters that provide socioeconomic profiling.

3. Darden has shied away from urban locations; high location

costs do not fit its current model, but Darden has found fertile

ground in first- and second-tier suburban and exurban/small (over

90% of the Red Lobsters are in these three density classes). Inci-

lects and analyzes about each site. As such, it provides the answer

to the first question.

2. The ratings of the four cities are

A = 80.5, B = 64.5, C = 71.5, and D = 79.5. So City A is a close

first choice over City D. In reality, they are so close that other

3. Expansion is the lifeblood of any global organization. Good

decisions mean a 10– to 20–year cash flow. Bad ones mean a

10-plus year commitment to a money-losing location.

4. Hard Rock considers political risk, crime, currency, and other

factors in location decisions abroad. In Russia and Colombia,

corruption is so endemic that having a local partner who can

understand and handle these issues is a necessity.

1. The five factors appear reasonable. Many others could be

included, such as potential parking or concession revenue, park-

ing, and long-term potential.

2. Option 1 Expand y = $1,000,000 + $1x

1. Identify comparable existing HRC markets

2. Explain similarities (e.g. regional population, visitors,

hotel rooms, seasonality, etc.)

3. Prepare city P&L spreadsheet analysis

Conclusion

1. Estimate of Gross Food & Beverage Revenue for

market in General with backup and comparables

2. Estimate of Gross Merchandise Revenue for market

in General with backup and comparables

122 CHAPTER 8 LO C A T I O N ST R A T E G I E S

Option 2 New stadium y = $5,000,000 + $2x

Option 3 Rent y = $1,000,000 + $750,000 + $1x



3. Based on the survey data, rating “comfort” and “national

image” as 1s, “convenience” as a 2, and “cost” and “guaranteed

availability” as 4s, the results (using A = 4, B = 3, C = 2, D = 1,

4. The expansion of the existing stadium appears preferable

even at annual attendance of 500,000 fans.

5. Gardner used the factor rating method to rate the constituency

responses. This was appropriate for evaluating the qualitative

values. He should consider weighting the criteria as the admin-

*This is the solution to the case that appears on our Web sites www.pearsonhighered.com/heizer and www.myomlab.com.