Selecting a US plant location: the management decision process in foreign companies

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Author: Robert Haigh
Date: Fall 1990
From: Columbia Journal of World Business(Vol. 25, Issue 3)
Publisher: Elsevier Advanced Technology Publications
Document Type: Article
Length: 4,614 words

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Selecting a US Plant Location: The Management Decision Process in Foreign Companies TO EXAMINE the plant-selection process in foreign companies, we interviewed executive in 20 US affiliates or subsidiaries or foreign companies over a four-month period in 1988. Data characterizing the 20 US affiliated companies in the study are presented in Table 1. The companies produce a diversified range of products in various industries, they vary greatly in size (as measured by initial employment), from five to 550 employees, and they represent a good cross-section of foreign home countries.

The 20 foreign affiliates are owned by companies with home offices in ten different foreign countries. Japanese companies have the largest representation, owning the equivalent of 4.5 facilities (four subsidiaries and a 50% interest in a joint venture). The nation with the second largest ownership interest in the companies is West Germany, with Switzerland being third. Sixteen of the plants began operations after 1985. The plants are all located in Virginia.

Field interviews were conducted in the plants or offices of fifteen companies; telephone interviews were completed with the five remaining companies. In all but three cases the executives cooperating in the field research had played a key role in the site-selection process. The field research was supplemented by a comprehensive literature search.

In the interviews, we relied heavily upon an open-ended inquiry approach. We did not ask the executives to rate predetermined location factors, such as nearness to markets or favorable wage rates. Rather, our questions were nondirective and broad: How did you go about making the plant-location decision? What were the principal factors that influenced your site-selection decision? We also inquired into various facets of the management process: Who was involved in the analysis and decision? In what order or sequence were the analyses and decisions made?

The executives tended to focus on those factors that differentiated one site from another. They seemed less likely to mention a location factor if a competing location appeared to have somewhat the same advantage, even if the factor was relatively important. That is, factors of about equal attractiveness tended to "wash" in the decision process.


One conclusion emerges clearly from past research regarding the plant-location decision process: firms typically approach the decision as a multistage process. (1) In most cases, companies first choose a region, and only then do they begin to evaluate specific communities and sites. The factors considered during the two stages can vary considerably. In the first stage, a few high-priority items are used to identify those states that satisfy the most important criteria. Important considerations at this point are the availability and cost of labor and proximity to markets. (2) For companies concerned about unions, Schmenner found that the first step is to look only at right-to-work states.

Schmenner, Huber and Cook (3) pointed out that all states passing the first cut, based on the high-priority screening criteria, are apt to be rated highly, wit only small differences in the ratings. At the next stage of...

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Source Citation
Haigh, Robert. "Selecting a US plant location: the management decision process in foreign companies." Columbia Journal of World Business, vol. 25, no. 3, fall 1990, pp. 22+. Accessed 27 Jan. 2023.

Gale Document Number: GALE|A9702989