Question

1. Find an example of a good and an example of a bad location decision. Present each scenario, and discuss the implications of these location decisions (both good and bad) on the business. (Chapter 9) 2. In your own words, please explain the importance of a good inventory planning strategy, including the implications of limited and excess inventory. (Chapter 12)

Answer 1

1. Find an example of a good and an example of a bad location decision. Present each scenario, and discuss the implications of these location decisions (both good and bad) on the business.

Location decision is impactful on business. Selecting a good location for business is impactful in improving profitability. IT is impactful on cost and revenues as well. A busiesorganization must be efficient enough to decide on a location which is suitable for products and services the organization deals with. An example of good location decision is IKEA's decision to trade in Chinese furnishing market. An example of a bad location decision is Walmart’s decision to expand its target market in developing nations like India, Pakistan and Bangladesh.

Implication of good location decision

The furnishing market in China is well flourished. However, IKEA's effective technical potentials have promoted this organization to choose Chinese market and gain a competitive advantage. Implications of decision locations are as follows:

• Technological advancement of IKEA has helped this organization to grab the furnishing market in China and becomes a market leader
• There is a demand for low-cost quality furnishing items in China which is strongly satisfied low-cost quality furniture of IKEA
• The effective marketing team of IKEA quickly adopted the cultural preferences of Chinese people before entering into the market. This marketing analysis has helped IKEA to gain a good market share in Chinese furnishing market

The implication of bad location decision

Implications are as follows:

• Target consumers in developing nations are not efficient enough to cop up product price of Walmart
• Political turmoil in developing nations are not suitable to host business
• Existing tax system and trade policies are not supportive of foreign trade

2. In your own words, please explain the importance of a good inventory planning strategy, including the implications of limited and excess inventory.

A good inventory planning strategy is one that meets 100% demand and can adjust to any fluctuations in the demand cycle, without causing additional burdens to the organization either in terms of lost sales or in terms of excess inventory carrying cost.

Limited inventory may have the following positive and negative impact:

1. If demand suddenly drops or a new competitor suddenly crops up in the market with a competitively priced product or customer's taste has changed suddenly, you re in a better position to create a new strategy and not rely on obsolete products. Thus you can save cost and quickly shift to the new strategy for adaptation.

2. If your forecasting is wrong and your demand for the product has increased, you may lose a valuable customer to competitors. Your revenue generated would be low because of less utilization of available capacity.

Excess inventory has the following effects:

1. If there is a sudden upsurge of demand, you will able to increase your customer base, sell more, generate more revenue.

2. If the demand is not predicted correctly you may end up aggregating inventory, which will incur the cost of inventory holding, space cost, product may get obsolete, you may not be able to adapt to the new strategy.