Location Risk and Benefits

A location strategy can be defined as setting a plan for a company or business to obtain the most appropriate location that will meet its needs and objectives. As most entrepreneurs would say, being in the most appropriate location is a key aspect in any business. Location defines the kind of customers that a business can have, the worker turnover and transportation of materials as required. It, therefore, stands out that location will play a huge part in the overall profitability of a business. This paper is a summary of an article by John Miller on the effects of location in real estate.

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Article Review

From the "Business Insider" journal, John Miller states that when it comes to real estate, location is key (Miller, 2013). In the article, the author advised his readers, especially those who are drawn to investing in foreclosures. He claims that it is important that one considers location as the most important element in the real estate business. In the article, the author brings out the notion that people must understand the general importance of location in such circumstances, saying that elements such as homes' access to interest, high-quality schools, and surrounding attraction define the extent to which the value of a real estate property gets.

In the initial section of the article, the author seeks to emphasize the importance of a real estate's market. In the section, he brings out the claim that the local real estate market has grown into a key element in making smart investment decisions now that it is evident that states and cities will make varying progress towards recovery. The article brings out the notion that the importance grows with the opinion that some cities will make quicker progress towards recovery than others.

In a way to emphasize his opinion, the author gives an example with the state of California and Florida. He states that an individual who wants to invest in foreclosures in California may experience some challenges in finding homes as compared to one who seeks to find foreclosure deals in Florida. The author reveals that the difference in the two states is determined by the fact that California's real estate market is making continuous progress in the direction of recovery and the foreclosure filings are significantly reduced as compared to the Floridian market that is still struggling to take steps forward. Another reason that the author uses to qualify the allegations regarding the real estate difference is that California has experienced more influx in short sales as compared to foreclosures in the recent past. Therefore, the author advises that one needs to include short sales to their searches when seeking discounted properties around California

As in any other business, the author acknowledges that real estate also demands that location strategy will attempt to maximize opportunities and profits while minimizing risks and cost. He claims that the location approach should always conform to the general corporate strategy and be part of it in the end. Therefore, like any other business, if a real estate business strives to become globally identifiable, then it must contemplate establishing itself in areas that are coherent with its strategy. The regions must, therefore, be optimally situated to serve their overall consumers. Further on, the author brings out the ideology that real estate firm managers and executive will always develop location strategies to use and then select economic development groups to carry out the task to assist in its development, especially if the executives are less experienced in selecting the appropriate locations that appropriately fit the business.

In selecting a location strategy, the author acknowledges that statistics play an equally important role as well. He says that although it is essential to consider the real estate's market, especially when buying foreclosures, the statistics of the city that one chooses becomes as determinant as any other thing. He uses the example of Dallas Texas, where he claims that the infographics have recently revealed that in the city, 1 in every 3233 homes are in foreclosure. He compares the information with the entire state of Texas, where he says that the infographics have revealed that 1 in every 1336 homes are in foreclosure. From the statistics, he states that the real estate market in Dallas is generally stronger than the entire state of Texas. From the statistics, the author suggests that anyone who would want to invest in a stronger market in Texas would require to invest in Dallas specifically as compared to other cities.

From the article, the author notes that one needs to decide what they are looking for in such a business in the first place. An individual can be seeking different things from the business as compared to the others. For instance, one might be seeking areas that are still striving to improve in the direction of recovery as they would be having high foreclosure inventory while others would be looking to capitalize in regions that are definitively on their way to recovery and often have fewer homes to choose from (Miller, 2013). The author claims that defining the type of investment that one requires should be an eye-opener regarding the local market in real estate. In general, therefore, he claims that the formulation of a working location strategy for real estate should be as similar to formulating a strategy for other businesses in one of the following ways:

The planning should include determining the space that a business will require for its short-term as well as long-term goals.

The business should have a feasibility analysis that provides a strong examination of the various operating costs as well as other elements associated with the location.

The logistics evaluation should give a defining the appraisal of the transport costs and options for the business prospect and warehousing whenever there is need.

The business should have a labor analysis that would determine whether the prospective location can cater for the business' labor requirements to meet its short-term and long-term goals.

The business should have an evaluation for the community and site that would involve assessing whether it is compatible with the community and site for its long-term goals.

The business should always consider expanding into other areas despite the political risk at hand when developing a location strategy, especially when considering to move into other countries with unstable political environments. In such cases, the business should be ready for upheaval and turmoil while planning for the long-term in those countries.

Selecting a location strategy would require that the business considers governmental regulations since they may face governmental barriers as well as heavy restrictions while intending to expand into other regions.

The business also needs to consider environmental regulations that might affect its operations in the various regions. The regulations may also affect the relationship between the community and the business in the long run.

Lastly, the author advises that the business should consider incentives negotiation, which involves the business and the community negotiating any benefits that the company may receive while operating in the region. The negotiation can be influential in the way that the business chooses its sites in the end.

From the perspective of determining a location for real estate business, the author cites some benefits and risks that a business might incur during the selection of a location. He claims that the initial part of coming up with a location plan entails much of what the company would need from its locations (Miller, 2013). He then claims that the needs would further serve as a primary criterion that the business would use to evaluate its different location options. He summarizes the risks and benefits as follows.

The first location issue he tackles is traffic, which he claims that can be beneficial if the statistics show that the location has high traffic. The high traffic guarantees availability of customers, which then goes to boost the business in both short term and long-term achievements. The risk, however, comes when the business is situated in a low traffic location, which would deprive it of customers and hence slow down achievement.

The author also tackles the effect of cost, claiming that a business should determine its maximum total cost at any point of a location transaction. The element of cost can be beneficial if it is lower and therefore allows for higher profitability in the end. However, higher cost locations can be detrimental for a business as it would give inadequate return rates from investments.

The author also mentions the aspect of labor, apart from the general cost, claiming that a business that establishes itself in a location with higher labor criteria would benefit from a high-stature labor pool including desired skilled level labor. On the other hand, the article reveals that establishing a business in a location with shaky labor criteria would deprive the business of skilled labor that might be crucial for its success.

With the location selection techniques available, the author emphasizes more on service business, which he claims that must uphold the number of sites that are close to consumers as much as possible. He claims that the selected location should not only be close to a general consumer group but specifically close to the targeted market segment. He emphasizes that the market controls the number and sizes of new locations that the business would have. He, therefore, suggests that a business needs to establish minimum criteria for choosing a location as one of its simple selection techniques. He claims that developing such measures should be in a way that the selected locations would have a strong chance of success. From the article's point of view, a business can access the value of prospective locations as per the criteria that is based on population and annual per capita income. The author claims that the population and community should be at least 10,000 while the annual per capita income should be at least $35,000.

In conclusion, the article acknowledges that some of the location trends in the business world, in general, have remained to be cost, labor characteristics, political and governmental regulations, infrastructure and the economy. It further acknowledges that some of the key sub-factors remain to be the quality and availability of labor force; quality and reliability of utilities; work motivation; wage rates; the record of government stability; quality and reliability of transportation modes as well as telecommunication. Therefore, the article summarizes that location matters in the business world and, in real estate, where one chooses to set the business affects the property chosen as well as the return on investment.

Reference

Miller E. BIBLIOGRAPHY \l 1033 J. (2013, January 14). When it comes to Real Estate, Location is Key. Business Insider. Retrieved from Business Insider.