Risk Analysis Techniques of Production Location Decisions

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Research Methodology

This chapter describes the research methods and techniques that are applied for conducting the research with the purpose of expressing why they are appropriate for this type of research. As mentioned by Yin (2003), a research should be formulated in a way that commences with choosing research approach, method for data collection and discussing the research evidences to come up with the theory or having a result. According to Bryman and Bell (2007), a research is conducted with the ultimate goal of achieving a better understanding of interactions and presenting appropriate interpretations. When it comes to our study, it is conducted with the purpose of having a better understanding of risk analysis techniques of production location decisions and frameworks under which the most relevant risks of production location decisions are mentioned. Hence a systematic method of literature review that includes content analysis and coding (Bryman and Bell, 2007) is conducted to ease the process of analysis. Following this section, firstly our research strategy is justified and presented. Then the method of content analysis will be shortly introduced. Having used coding manual, coding schedule, and right words for searching the most relevant articles to the subject; the appropriate material for thesis was looked for. Reliability and validity of research design is also discussed to assure thesis is answering to its questions

Methodology Approach

In this section methodology approaches and research traditions are compared to emphasize the similarities between research study traits and mostly used research approaches. According to Bryman and Bell (2007), research strategy is the general orientation to the conduct of a research which has been classified to qualitative and quantitative. In every research the collected data is to be interpreted and discussed and the procedure of interpretation and discussion can be changed depending on whether the research is quantitative or qualitative. According to Williamson (2002) the qualitative analysis is the way that researchers interpret collected data and articulate the results by articles and books.
In this study, the process of structuring and giving meaning to the mass of collected data follows a qualitative design. The data collected are presented as the result of a literature review. Qualitative strategy toward the research is chosen which its principal approach to theory is inductive

Basic Research and Applied Research

Williamson (2002) introduces two research types of ‘basic research’ and ‘applied research’. Basic research is defined as a fundamental, theoretical research which mostly concerns with new knowledge that could be applied to unique problems in order to broaden the perspective and thus focuses on theory building. The second type of research introduced by Williamson (2002) is the applied research with the aim of solving specific problems in real life context. Although the field of production location decision seems to be an applied research because of its applicability to new plant births, it is realized that the state of categorizing risks involved in production location decisions has more characteristics of basic research. Therefore many of the research done so far on risk analysis of production location decisions are of basic research type and there are very few applied researches conducted on this topic. However Williamson (2002) articulates that there is no clear distinction between basic research and applied research and common techniques are sometimes used for both research types

Deductive and Inductive Reasoning

Before going through the research approach, it is necessary to introduce the underlying reasoning throughout the research. Williamson (2002) suggests there are two main reasoning styles according to the used philosophy to shape the research. The two subjected reasoning styles are deductive and inductive. While deductive reasoning is related to positivistic approach which is associated with hypothesis testing, the inductive reasoning is associated with forming hypotheses from special instances and ends in general principle conclusion by analysis of data collected (Williamson, 2002; Bryman and Bell, 2007).
This research study is conducted under the inductive reasoning logic and the literature review is done through main risk analysis techniques of production location decisions and frameworks under which general risks of facility location decisions are presented

Positivist and Interpretive Approaches

Having found the appropriate reasoning logic, an approach based on the chosen reasoning style should be selected. Based on the Williamson (2002), positivist and interpretive approaches are two main and distinct research approaches.
The positivist approach is mainly associated with quantitative data and experimental design (Williamson, 2002; Bryman and Bell, 2007). On the other hand, interpretive approach is involved with the qualitative methods of research and is generally applied to case studies and basic research. According to Williamson (2002), interpretive researchers conduct a literature research to gain an understanding of their topic, and afterwards develop the theories and research questions. Although this research does not present any theory at the end; since the only source of data for this research were mainly journal papers and verbal reasoning, an interpretive approach to analyse the qualitative data is taken beforehand.
As stated in 2.1, this thesis is designed as a qualitative research study with the aim of achieving knowledge and understanding of risk analysis techniques and frameworks of production location decisions and classifying the important risks involved in production location decisions

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Content Analysis as Research Method

Bryman and Bell (2007, P302) define content analysis:“as an approach to the analysis of documents and academic published materials that try to quantify content in terms of predefined categories and perform it in a systematic and replicable way”. Withstanding the claim that content analysis is not a research method and is an approach used to create data through reading articles and texts, it is known as a research method because of its distinctive approach to analysis (Bryman and Bell, 2007).
There are three main phases in content analysis including (1) selecting the sample; choose of the terms that need to be counted, and (3) coding which is illustrated in Figure 3.
The research question can to a large extent determine what needs to be counted in terms of words, significant authors or special subjects and themes in the second stage of the method. According to Bryman and Bell (2007) the coding includes coding ID and coding manual. The coding manual collects all the data that should be collected from articles and documents in special categories. The coding ID guides how to clearly describe these categories according to which the articles and books will be classified

Selecting the sample

Choosing the media has two phases in content analysis (Bryman and Bell, 2007). Firstly the types of media are chosen and afterwards the dates of media are designated by the reviewer.

 Sampling Media

Six major databases of management journals are specifically chosen for media search for the study. The main six search databases are:

  • Journal Storage (JSTOR)
  • EBSCO
  • Emerald Journals
  • Web of Science (ISI)
  • Science Direct (Elsevier)
  • Scopus

The study tries to highlight the published scholar on risk analysis of production location decisions. For instance since foreign direct investment (FDI) is a framework under which most of uncertainties and risks of going beyond borders for production firms are mentioned, the search term of “FDI” in title, keywords or abstract was used in order to find the corresponding articles. Also because the study deals with ‘risk analysis of production location decisions’; the search terms of “risk analysis”, “location decisions” also used in this stage. Furthermore since FMEA and LCC are two fields found in previous search terms (risk analysis applied to production location decisions); the search terms of “FMEA” and “LCC” in title, keywords or abstract of articles were searched to find relevant articles to production location decisions. Moreover the search was not restricted to production sciences only, since many of the risks of production location decisions are monetary based and are mentioned in business and economy journals. For example some of the risks mentioned under the framework of FDI like expropriation and inflation are mainly covered by international business articles. In order to cover the whole related published media on risk analysis of production location decisions and maintain the reliability of study, two journals of ‘risk analysis’ and ‘location science’ were separately searched for relevant articles to risk analysis of production location decisions in order to assure covering all the relevant media.
The search was also expanded to a separate seek in Google scholar search engine of website of Jönköping university for finding related articles. The mentioned search terms in title, keywords or abstract were used. Although it can be argued that the choice of media and search terms makes the study biased; the comprehensive range of journal articles that are related to the topic of risk analysis of production location decisions justifies the right choice. A descriptive statistics of used journals are presented in section 2.7 and 2.8 sections.

Sampling Dates

In order to maintain the validity and comprehensiveness of research, the reviewers of this thesis did not consider a specific time interval for media search. However in order to facilitate more work in future, it is tried to focus more on recently published media using coding manual.

What needs to be considered
Words and Important Authors

What needs to be considered is determined by the research questions that the master thesis aims to answer. For this master thesis the most significant thing was to find appropriate search words in order to find articles and documents as related and near as possible to our theme of thesis to make it valid and reliable. Also the most contributing authors to the subject are introduced in order to ease the future research.

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 Subjects and Themes

The search of appropriate words leads to identifying the most related subjects and themes of production location decision. Foreign direct investment and international production are two frameworks under which the most relevant risks of production location decision are identified. Furthermore life cycle costing, failure mode and effects analysis, and system engineering are the three subjects of risk analysis techniques of production location decisions.

 Coding

We used a modified version of Bryman and Bell’s (2007) coding phase of content analysis. A combination of open and structured coding took place by filling out the scheme based on coding manual for each article. We also made an overall discussion of every article by separately summarizing the most important and related issues of it.
The structured coding approach bears a bivalent function for the thesis. Firstly this approach helps reviewers to answer the research questions mentioned in 1.2.1 section. Secondly it helps readers to know about authors who are among the most active scholars in the subject and introduces journals which have published relevant articles to the subject. Also this system eases further research in future. Appendix 2 shows the coding scheme and coding manual which contributes to replicability and validity of thesis.
The first research question:
How are risk / sensitivity analysis techniques that either have been or can be applied to production location decisions, addressed in the literature?
asks for most applicable risk analysis techniques or those that can help to create a decision support system for a production location problem. In order to answer this question certain words and phrases which pertain to the specific risk analysis techniques are chosen and looked for in the title and abstract of articles. The title, abstract, purpose and conclusion of each article was meticulously studied since these parts carry the most important ideas of them. In the table 1, each category introduces separate subcategories of risk analysis techniques related to production location decisions or frameworks like FDI that encompasses risks of international production which have been looked for in the media. This process helped to find and categorize the risks of production location decisions and hence answer the second research question:
Which risks, have been emphasized in the sensitivity analysis techniques that are applied to production location decisions?
which asks for risks of establishing production in a location in a second country and is answered through categorizing risks of moving production beyond borders.
It is evident that some words in the third column of table 1 were common among other categories. Thus in order to find more relevant material, one should consider the common key words in the process of search. In order to categorize the risks better and make it easier for future studies on risk analysis of production location decisions, open coding is done after complete review of literature which decides upon what category the article belongs to. The coding ID table is illustrated below

1 Introduction
1.1 BACKGROUND
1.2 AIM AND RESEARCH QUESTIONS
1.3 DELIMITS
1.4 OUTLINE
2 Research Methodology 
2.1 METHODOLOGY APPROACH
2.2 CONTENT ANALYSIS AS RESEARCH METHOD
2.3 SELECTING THE SAMPLE
2.4 WHAT NEEDS TO BE CONSIDERED
2.5 CODING
2.6 VALIDITY AND RELIABILITY
2.7 PRESENTING THE DESCRIPTIVE STATISTICS OF RESULTS
2.8 DESCRIPTIVE STATISTICS OF RESEARCH DESIGN OF PAPERS
3 Literature Review
3.1 FAILURE MODE AND EFFECT ANALYSIS
3.2 LIFE CYCLE COSTING
3.3 FOREIGN DIRECT INVESTMENT
3.4 SYSTEMS ENGINEERING RISK ANALYSIS AND RISK MODELING
3.5 INTERNATIONAL PRODUCTION FRAMEWORK
4 Risk Analysis Techniques of Production Location Decisions 
4.1 FMEA IN PRODUCTION LOCATION DECISIONS .
4.2 SYSTEM ENGINEERING: MEASURING RELIABILITY AND AVAILABILITY OF RESOURCES IN PRODUCTION LOCATION DECISIONS
4.3 LIFE CYCLE COSTING: ANALYSIS OF RISKS OF PRODUCTION LOCATION FROM CRADLE TO GRAVE
5 FDI: A Compass to Show the Way 
5.1 RISKS OF FDI: WHAT LIES BEHIND?
5.2 HOW TO TREAT FDI RISKS?
6 International Production: Uncertainties and Risks
6.1 ECONOMIC RISKS
6.2 COMPETITIVE RISKS
6.3 COORDINATION AND SUPPLY RISKS
6.4 SOCIAL AND CULTURAL DIFFERENCES; SOURCES OF UNCERTAINTIES
6.5 SEISMIC RISKS AND NATURAL DISASTERS
7 Production Location Decision Techniques: Strengths and Weaknesses 
7.1 FMEA: STRENGTHS
7.2 FMEA: SHORTCOMINGS AND WEAKNESSES
7.3 LCC: STRENGTHS
7.4 LCC: LIMITATIONS AND WEAKNESSES IN IMPLEMENTATION
7.5 SYSTEM ENGINEERING RISK ANALYSIS METHODS OF PRODUCTION LOCATION: STRENGTHS AND WEAKNESSES
8 Results 
9 Conclusion and Discussion 
9.1 CONCLUSION
9.2 DISCUSSION
10 References 
11 Attachments
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