Manufacturing site location is an important consideration in determining the optimal deployment of a firm's production resources, but one that is usually given only limited attention. Decisions about location are often based purely on quantitative analyses that trade off transportation costs, economies of scale, and other cost-based variables. This practice, however, can lead to suboptimal results, as decision-makers tend to focus only on easily quantifiable factors. A further disadvantage of strictly cost-based methods is that they tend to focus on cost advantage factors, which are often transitory Government regulations, tax systems, and exchange rates can quickly change. Strategies based on such parameters may eventually be rendered obsolete by the very factors that first created an advantage.

In contrast, qualitative issues, which are frequently neglected in choosing manufacturing site locations, are often central to creating and supporting a competitive advantage. For example, the level of skill possessed by the local workforce varies with location; consequently, location can affect the ability of firms to implement skill-based process technologies. When formulating a site location strategy, companies should therefore emphasize qualitative factors to ensure that the chosen strategy supports the company's overall business strategy. Only after establishing a set of desirable location options should companies refine choices using cost-based factors.

The passage suggests which of the following concerning qualitative methods used in choosing manufacturing sites?

They are more likely than are quantitative methods to identify issues crucial to maintaining a competitive advantage

They are least useful to companies with relatively low levels of manufacturing technology

They have little value when applied to decisions other than choice of site

They are more risky for decision makers than are quantitative methods

They are used more frequently by multinational corporations than by companies with strictly domestic operations.


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