Question

1Discuss how the examples in the opening case show how the choices facing a firm making a longrun decision on plant location are much greater than those for a firm with a plant already in operation. Why is the long run considered to be a planning horizon

Answer 1

Answer with its Explanation:

The decision on plant location of immense importance for the organization as it would play important role in cost controls and increased sales due to greater access of customer to company's products. There are also other aspects that matters a lot and few of these are as under:

• Labor Cost. If the labor cost is far much below in the other countries that it will help to decrease most of the product cost to compete in the international market.
• Free Trade Agreements. The country in which the company wants to operate must have free trade agreements with the country where there are potential customers who will like to buy the product. The country with free trade agreements doesn't imposes custom duties on import of a particular product and similarly the other country also doesn't imposes custom duties on the other country's exports.
• The country's infrastructure, political stability, Ease of business in the country, Justice, Potential customers, potential competitors in those areas, etc, are all key factors that must be considered
• The plant location also plays important role in reducing the distribution expenses.
• The level of skills the country possesses for the effective running of the operations of the company, etc.

The planning horizon is the future time period for which the company is looking into to make sure that the business grows and future benefits will flow towards the organization.