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144 CHAPTER 4 • CAPACiTy sTRATEgy
Where the stimulus for relocation is a change in demand, it may be because of a change
in the aggregated volume of demand. For example, if the demand for a clothing manu-
facturer’s products is increasing beyond its capacity, the company could either expand
at its existing site or, alternatively, if the site is not large enough it could move to a larger
site in another location. A third option would be to keep its existing site and find a
second location for an additional plant. Two of these options involve a location deci-
sion. Similarly, a reduction in the aggregate volume of demand may mean the company
underutilising its site, selling or leasing part of the site, or moving to a smaller new site.
Some high-customer-contact operations do not have the choice of expanding on the
same site to meet rising demand. For example, a fast-food restaurant chain competes, at
least partially, by having locations close to its customers. As demand increases, it may well
respond by investing in more locations. There will come a time, however, when locating
a new restaurant in between the areas covered by two existing ones will, to some extent,
cannibalise demand. The other reason for relocation is some kind of change in the cost
or availability of its supply of inputs. An oil company, for example, will need to relocate
as the oil it is extracting becomes depleted. A manufacturing company might choose to
relocate its operations to a part of the world where labour costs are low. In other words,
the labour costs differential, in the context of its competitive position, has changed.
Similarly, the value of the land it has occupied compared with an alternative location
may become too great to forego the opportunity of releasing the value of the land.

Spatially variable factors
A prerequisite to effective location decisions is to understand the spatial characteris-
tics of costs, revenues and investment. ‘Spatial characteristics’ are those whose value
changes with geographical location. In not-for-profit organisations, where revenue may
not be a relevant objective, customer service may be used as a substitute. So, for exam-
ple, the fire service may use average (or maximum) response time as its ‘market phasing’
objective. Figure 4.11 identifies some of the spatially variable factors that organisations
may use in location decisions.

Figure 4.11 some factors influencing the location of sites

Required
Resource service
Land and costs level Suitability
facilities of site
investment

OPERATIONS Location MARKET
RESOURCES of sites REQUIREMENTS

Resource Image of
availability location
Community
factors

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