1. Copyright © 2016 Pearson Education, Inc.

2. 14 Choosing the Right Location and Layout
Section 4: Growing the Business 14
Choosing the Right Location and Layout
Copyright © 2016 Pearson Education, Inc.
14-2

3. Copyright © 2016 Pearson Education, Inc.
Learning Objectives
Explain the stages in the location decision: choosing the region, the state, the city, and the specific site.
Describe the location criteria for retail and service businesses.
Outline the location options for retail and service businesses; central business districts, neighborhoods, shopping centers and malls, retail competitors, shared spaces, inside large retail stores, nontraditional locations, at home, and on the road.
Copyright © 2016 Pearson Education, Inc.

4. Copyright © 2016 Pearson Education, Inc.
Learning Objectives
(continued)
Explain the site selection process for manufacturers.
Describe the criteria used to analyze the layout and design considerations of a building, including the Americans with Disabilities Act.
Explain the principles of effective layouts for retailers, service businesses, and manufacturers.
Copyright © 2016 Pearson Education, Inc.

5. Copyright © 2016 Pearson Education, Inc.
Choosing a Location
Having the right location for a business can be an important source of competitive advantage.
Consider:
The right region of the country
The right state in the region
The right city in the state
The right site in the city
Copyright © 2016 Pearson Education, Inc.

6. Choosing the Region: Sources of Information
Census data
s/index.xhtml
ZoomProspector
Zipskinny
Copyright © 2016 Pearson Education, Inc.

7. Choosing the Region: Sources of Information
(continued)
Zip Code Atlas and Market Planner
Lifestyle Market Analyst
Site Selection
Editor and Publisher Market Guide
The American Marketplace: Demographics and Spending Patterns
Copyright © 2016 Pearson Education, Inc.

8. Choosing the Region: Sources of Information
(continued)
Small Business Development Center
development-centers-sbdcs
Population Reference Bureau
Euromonitor International
OECD
Copyright © 2016 Pearson Education, Inc.

9. Copyright © 2016 Pearson Education, Inc.
Choosing the State
Proximity to markets
Proximity to needed raw materials
Wage rates
Labor supply needs
Business climate
Copyright © 2016 Pearson Education, Inc.

10. Most and Least Small-Business-Friendly States
Copyright © 2016 Pearson Education, Inc.

11. Copyright © 2016 Pearson Education, Inc.
Choosing the State
(continued from 14-9)
Proximity to markets
Proximity to needed raw materials
Wage rates
Labor supply needs
Business climate
Tax rates
Copyright © 2016 Pearson Education, Inc.

12. State Business Tax Climate Index
Copyright © 2016 Pearson Education, Inc.

13. Copyright © 2016 Pearson Education, Inc.
Choosing the State
(continued from 14-11)
Proximity to markets
Proximity to needed raw materials
Wage rates
Labor supply needs
Business climate
Tax rates
Internet access
Copyright © 2016 Pearson Education, Inc.

14. Internet Download Speeds
Copyright © 2016 Pearson Education, Inc.

15. Copyright © 2016 Pearson Education, Inc.
Choosing the State
(continued from 14-13)
Proximity to markets
Proximity to needed raw materials
Wage rates
Labor supply needs
Business climate
Tax rates
Internet access
Total operating costs
Copyright © 2016 Pearson Education, Inc.

16. State Evaluation Matrix
Copyright © 2016 Pearson Education, Inc.

17. Best and Worst States for Doing Business
Copyright © 2016 Pearson Education, Inc.

18. Copyright © 2016 Pearson Education, Inc.
Choosing the City
Population trends
Copyright © 2016 Pearson Education, Inc.

19. States with the Most Top Micropolitan Areas
Copyright © 2016 Pearson Education, Inc.

20. Copyright © 2016 Pearson Education, Inc.
Choosing the City
(continued from 14-18)
Population trends
Competition
Clustering
Compatibility with community
Local laws and regulations
Copyright © 2016 Pearson Education, Inc.

21. Copyright © 2016 Pearson Education, Inc.
Choosing the City
(continued)
Appropriate infrastructure
Cost of utilities and public services
Incentives
Quality of life
Copyright © 2016 Pearson Education, Inc.

22. Copyright © 2016 Pearson Education, Inc.
Choosing the Site
Test the suitability of potential locations by opening “pop-up” stores.
Consider downsizing outlets to lower start- up and operating costs and to allow for more location options that are not available to full-sized stores.
Example: Burger King
Copyright © 2016 Pearson Education, Inc.

23. Location Criteria for Retail and Service Businesses
Trade area size:
The region from which a business can expect to draw customers.
Retail compatibility
Degree of competition
Index of retail saturation (IRS)
Copyright © 2016 Pearson Education, Inc.

24. Index of Retail Saturation
IRS = C x RE RF
Where:
C = Number of customers in the trading area
RE = Retail expenditures equals the average expenditure per person for the product in the trading area
RF = Retail facilities = the total square feet of selling space allocated to the product in the trading area
Copyright © 2016 Pearson Education, Inc.

25. Location Criteria for Retail and Service Businesses
(continued from 14-23)
Trade area size:
The region from which a business can expect to draw customers.
Retail compatibility
Degree of competition
Index of retail saturation (IRS)
Reilly’s law of retail gravitation
Copyright © 2016 Pearson Education, Inc.

26. Reilly’s Law of Retail Gravitation
Copyright © 2016 Pearson Education, Inc.

27. Location Criteria for Retail and Service Businesses
(continued from 14-25)
Transportation network
Physical and psychological barriers
Customer traffic
Adequate parking
Reputation
Visibility
Copyright © 2016 Pearson Education, Inc.

28. Retail & Service Location Options
Central Business Districts (CBDs)
Neighborhood locations
Shopping centers and malls
Copyright © 2016 Pearson Education, Inc.

29. Shopping Centers and Malls
Strip shopping centers
The smallest of all shopping centers, but make up the bulk of all the centers in the United States.
Neighborhood shopping centers
3 to 12 Stores; anchor is supermarket or drugstore; serves up to 40,000 people.
Copyright © 2016 Pearson Education, Inc.

30. Shopping Centers and Malls
(continued)
Community shopping centers
12 to 50 stores; anchor is department or variety store; serves 40,000 to 150,000 people.
Power centers
Combine drawing power of a mall with convenience of neighborhood shopping center; anchor stores typically occupy 80% of space.
Copyright © 2016 Pearson Education, Inc.

31. Shopping Centers and Malls
(continued)
Theme or festival centers
Employ a unifying theme, often involving entertainment, to attract tourists.
Outlet centers
Feature manufacturers’ and retailers’ outlet stores selling name-brand goods at discount prices; usually follows “open air” design.
Copyright © 2016 Pearson Education, Inc.

32. Shopping Centers and Malls
(continued)
Lifestyle centers
Located near affluent residential neighborhoods; designed to look more like a central business district than a shopping center or mall.
Regional shopping malls
50 to 100 stores; anchor is one or more major department stores; draws customers from a large trading area, often 5 to 15 miles or more.
Copyright © 2016 Pearson Education, Inc.

33. Shopping Centers and Malls
(continued)
Super-regional shopping malls
Similar to a regional mall but bigger; trading area is 25 miles or more in all directions.
Example:
West Edmonton Mall (West Edmonton, Canada), the largest mall in North America.
Copyright © 2016 Pearson Education, Inc.

34. Copyright © 2016 Pearson Education, Inc.
Evaluating a Location
Is there a good fit with other products and brands sold in the mall or center?
Who are the other tenants?
Demographically, is it a good fit?
How much foot traffic does it generate?
What is the average sales per square foot?
How much vehicle traffic does it generate?
What is the vacancy rate?
How much is the rent, and how is it calculated?
Copyright © 2016 Pearson Education, Inc.

35. Retail & Service Location Options
(continued from 14-27)
Near competitors
Shared spaces
Inside large retail store
Nontraditional locations
Home-based businesses
On the road
Copyright © 2016 Pearson Education, Inc.

36. Location Decisions for Manufacturers
Foreign trade zones
Copyright © 2016 Pearson Education, Inc.

37. How a Foreign Trade Zone Works
Copyright © 2016 Pearson Education, Inc.

38. Location Decisions for Manufacturers
(continued from 14-36)
Foreign trade zones
Business incubators
Copyright © 2016 Pearson Education, Inc.

39. Copyright © 2016 Pearson Education, Inc.
Business Incubators
Organizations that combine low-cost, flexible rental space with a multitude of support services for their small business residents.
More than 1,250 in operation across the United States.
They work!
Companies that “graduate” from incubators have a success rate of 87%.
84% of graduates stay in the local community, creating local job opportunities.
Copyright © 2016 Pearson Education, Inc.

40. Copyright © 2016 Pearson Education, Inc.
Layout
Layout:
The logical arrangement of the physical facilities of a business that contributes to efficient operations, increased productivity, and higher sales.
Study:
Employees believe that the quality and quantity of their work would increase by an average of 25% with better workplace design.
Copyright © 2016 Pearson Education, Inc.

41. Layout: External Factors
Size and adaptability
The size must be adequate to accommodate business needs.
Construction and appearance
The appearance must create the proper image or “personality” for the business in the customer’s eyes.
Copyright © 2016 Pearson Education, Inc.

42. Window Displays That Sell
Tips for window displays that sell:
Keep displays simple.
Keep displays clean and current.
Change displays frequently.
Get expert help if necessary.
Copyright © 2016 Pearson Education, Inc.

43. Layout: External Factors
(continued from 14-41)
Entrances
The entrance must invite customers in.
The Americans with Disabilities Act
Must comply with Americans with Disabilities Act (ADA).
Signs
Pay attention to the business sign, the most direct method of reaching potential customers.
Copyright © 2016 Pearson Education, Inc.

44. Copyright © 2016 Pearson Education, Inc.
Business Signs
Tell potential customers who you are and what you’re selling.
Should have contrasting colors and simple typeface.
Should be visible, simple, and clear.
Should be legible both day and night.
Must be maintained properly.
Must comply with local sign ordinances.
Copyright © 2016 Pearson Education, Inc.

45. Layout: External Factors
(continued from 14-43)
Building interiors
Ergonomics: the science of adapting work and the work environment to complement employees’ strengths and to suit customers’ needs.
Copyright © 2016 Pearson Education, Inc.

46. Copyright © 2016 Pearson Education, Inc.
Building Interiors
Ergonomics is an integral part of any design.
Proper layout and design pays off in higher productivity, efficiency, or sales.
Proper lighting is measured by what is ideal for the job being done – the use of natural light can increase retail sales.
Sound and scent should appeal to all customers and can boost sales.
Environmentally-friendly design for efficiency and appeal.
Copyright © 2016 Pearson Education, Inc.

47. Layout: External Factors
(continued from 14-45)
Building interiors
Ergonomics
Drive-through windows
Can be a relatively inexpensive way to increase sales.
Account for 70% of sales in quick-service restaurants.
Copyright © 2016 Pearson Education, Inc.

48. Layout: External Factors
(continued)
Sight, sound, and lighting
Support brand and image using colors and visual cues.
A business’s “soundscape” can have an impact on the length of time customers shop and the amount of money they spend.
Use scent as a sales tool.
Study: Stores using natural light experience sales that are 40% higher than similar stores using fluorescent lighting.
Copyright © 2016 Pearson Education, Inc.

49. Layout: External Factors
(continued)
Sustainability and environmentally friendly design
Recycled materials; high efficiency lighting, fixtures, and appliances
LEED principles
Copyright © 2016 Pearson Education, Inc.

50. Copyright © 2016 Pearson Education, Inc.
Layout for Retailers
Know your customers’ buying habits and plan your layout accordingly.
Display merchandise as attractively as your budget will allow.
Display complementary items together.
Recognize the value of floor space; never waste valuable selling space with non-selling functions.
Copyright © 2016 Pearson Education, Inc.

51. Space Values for a Small Store
Copyright © 2016 Pearson Education, Inc.

52. Layout for Manufacturers
Type of product
Type of production process
Ergonomic considerations
Economic considerations
Space availability within the facility
Copyright © 2016 Pearson Education, Inc.

53. Types of Manufacturing Layouts
Three basic layouts:
Product
Process
Fixed position
Copyright © 2016 Pearson Education, Inc.

54. Designing Production Layouts
Avoid the seven forms of waste:
Transportation
Inventory
Motion
Waiting
Overproduction
Processing
Defects
Copyright © 2016 Pearson Education, Inc.

55. Copyright © 2016 Pearson Education, Inc.
Conclusion
Location is an important decision for businesses in the areas of:
Retail
Service
Manufacturing
The criteria for site selection, layout, design, and ADA considerations present challenges and opportunities for entrepreneurs.
Copyright © 2016 Pearson Education, Inc.

56. Copyright © 2016 Pearson Education, Inc.