How do companies choose factory sites anyway?

[Swamp Fox]

Paul Krugman says Toyota chose Ontario, Canada because it has socialized medicine. (http://www.iht.com/protected/articles/2005/07/25/opinion/edkrugman.php) I think that's bovine excrement, because Toyota cited the quality of the work force, but, then again, I don't really know.

So how do companies choose their locations anyway? I know it's partly due to low wages, and Eastern Europe has been doing that. (http://businessweek.com/magazine/content/05_30/b3944003.htm) But then why didn't that plant go to Alabama? And why hasn't Mexico gotten all the plants in Detroit? If it's because Ontario and Michigan has better workforce, then how come they lost high-value-added plants?

And how does Mexico and Thailand compete with Japan for such plants anyway? The difference is so huge, I just can't see how they can talk the same thing.

Does anyone know?

[tke711]

There are multiple factors that come into play when companies are deciding on a location for a plant. Available workforce, taxes, tax incentives, distribution routes, energy costs, etc.

BTW, Paul Krugman is not alone in his idea. General Motors a few years back talked about how their Ontario plant is much more profitable because of Canada's socialized medicine, and the fact that GM doesn't have to pay the high health care costs associated with the contract the union in the US negotiated.

[Coot]

Add to that the skill level of the workforce, transportation costs to bring in raw materials, component costs and to get the product into the desired market.