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Section 3:
Launching the Business
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Essentials of Entrepreneurship and Small
Business Management
Ninth Edition
Chapter 14
Choosing the Right Location
and Layout
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Learning Objectives (1 of 2)
1. Explain the stages in the location decision: choosing the
region, the state, the city, and the specific site.
2. Describe the location criteria for retail and service
businesses.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Learning Objectives (2 of 2)
3. 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.
4. Explain the site selection process for manufacturers.
5. Describe the criteria used to analyze the layout and
design considerations of a building, including the
Americans with Disabilities Act.
6. Explain the principles of effective layouts for retailers,
service businesses, and manufacturers.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
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 © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Choosing the Region: Sources of
Information (1 of 3)
• Census data
– www.census.gov
– http://factfinder.census.gov
• Zoom Prospector
– http://zoomprospector.com/
• Population Reference Bureau
– www.prb.org/DataFinder.aspx
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Choosing the Region: Sources of
Information (2 of 3)
• Zip Code Atlas and Market Planner
• Lifestyle Market Analyst
• Site Selection
• Editor and Publisher Market Guide
• The American Marketplace: Demographics and Spending
Patterns
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Choosing the Region: Sources of
Information (3 of 3)
• Small Business Development Center
– http://sba.gov
• Population Reference Bureau
– http://prb.org/
• Euromonitor International
– http://euromonitor.com/
• OECD
– http://oecd.org/
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Choosing the State (1 of 4)
• Proximity to markets
• Proximity to needed raw materials
• Wage rates
• Labor supply needs
• Business climate
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Table 14.1 Most and Least Small-Business-
Friendly States
States Most Friendly to Small Businesses Blank
1. Nevada 6. Washington
2. Texas 7. Indiana
3. South Dakota 8. Arizona
4. Wyoming 9. Alabama
5. Florida 10. Ohio
States Least Friendly to Small Businesses Blank
41. Oregon 46. Vermont
42. Iowa 47. Minnesota
43. Connecticut 48. New York
44. Maine 49. New Jersey
45. Hawaii 50. California
Source: Based on Raymond J. Keating, Small Business Policy Index 2017, Small Business & Entrepreneurship Council,
21st Annual Edition, February 2017, p. 2.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Choosing the State (2 of 4)
• Proximity to markets
• Proximity to needed raw materials
• Wage rates
• Size and quality of labor force
• Business climate
• Tax rates
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Figure 14.1 State Business Tax Climate Index
Source: Jared Walczak, Scott Drenkard, and Joseph Henchman, 2017 State Business Tax Climate
Index, Tax Foundation, September 28, 2016, p. 1.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Choosing the State (3 of 4)
• Proximity to markets
• Proximity to needed raw materials
• Wage rates
• Labor supply needs
• Business climate
• Tax rates
• Internet access
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Internet Download Speeds
Figure 14.2 Average Internet Peak Download Speeds
(Mbps) by State
Source: Based on data from “Internet Connection Speed Map,” FastMetrics, 2017,
www.fastmetrics.com/internet-connection-speedmap-usa.php#average-speeds-by-state.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Choosing the State (4 of 4)
• Proximity to markets
• Proximity to needed raw materials
• Wage rates
• Labor supply needs
• Business climate
• Tax rates
• Internet access
• Total operating costs
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Table 14.2 State Evaluation Matrix
State Weighted Score (Weight * Score)
Location Criterion Weight
Score
(Low = 1, High = 5)
State 1 State 2 State 3
Quality of labor force Blank Blank Blank Blank Blank
Wage rates Blank Blank Blank Blank Blank
Union activity Blank Blank Blank Blank Blank
Property/building costs Blank Blank Blank Blank Blank
Utility costs Blank Blank Blank Blank Blank
Transportation costs Blank Blank Blank Blank Blank
Tax burden Blank Blank Blank Blank Blank
Educational/training assistance Blank Blank Blank Blank Blank
Start-up incentives Blank Blank Blank Blank Blank
Raw material availability Blank Blank Blank Blank Blank
Quality of life Blank Blank Blank Blank Blank
Other: Blank Blank Blank Blank Blank
Blank Blank Total Score Blank Blank Blank
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Table 14.3 Best and Worst States for Doing Business
(1 of 2)
Top 10 States for Doing Business
Overall Rank* State
Taxes and
Regulations
Rank Based
on Workforce
Quality
Living
Environment
1 Texas #6 #5 #10
2 Florida 7 23 9
3 North Carolina 15 10 3
4 Tennessee 4 8 8
5 Indiana 10 4 17
6 Arizona 12 14 11
7 South Carolina 11 19 6
8 Georgia 14 9 7
9 Nevada 3 22 21
10 Ohio 24 7 23
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Table 14.3 Best and Worst States for Doing Business
(2 of 2)
Bottom 10 States for Doing Business
Rank* State
Taxes and
Regulations
Workforce
Quality
Living
Environment
41 Rhode Island #44 #37 #39
42 Mississippi 33 48 50
43 Maryland 45 45 41
44 Hawaii 43 49 4
45 Massachusetts 47 16 38
46 Connecticut 48 36 37
47 New Jersey 42 40 48
48 Illinois 46 44 45
49 New York 49 38 47
50 California 50 35 26
*Rank is the result of a survey by Chief Executive magazine that asked 650 business leaders to rank the states on factors
such as taxes, regulatory burden, quality of workforce, and quality of life.
Source: Based on “2016 Best and Worst States for Business,” Chief Executive, May 6, 2016,
http://chiefexecutive.net/2016-best-and-worst-states-forbusiness-full-list/.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Choosing the City (1 of 3)
• Population trends
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Table 14.4 States with the Most Top
Micropolitan Areas
State Number of Top 100 Micropolitan Areas
Ohio 19
Kentucky 9
Indiana 6
North Carolina 6
Georgia 5
Illinois 5
Tennessee 4
Alabama 4
Nebraska 4
Michigan 4
Source: Based on Ron Starner, “The Findlay Formula Effect,” Site Selection, March 2016, pp. 115–129.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Choosing the City (2 of 3)
• Population trends
• Competition
• Clustering
• Compatibility with community
• Local laws and regulations
– Zoning laws
– Variance
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Choosing the City (3 of 3)
• Appropriate infrastructure
• Incentives
• Quality of life
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
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 © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Location Criteria for Retail and Service
Businesses (1 of 3)
• 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 © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Index of Retail Saturation
C ×RE
IRS =
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 © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Location Criteria for Retail and Service
Businesses (2 of 3)
• 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 © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Reilly’s Law of Retail Gravitation
1+
=
b
a
d
BP
P
P
where
BP = the distance in miles from location A to the break point
d = the distance in miles between locations A and B
Pb = the population surrounding location B
Pa = the population surrounding location A
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Location Criteria for Retail and Service
Businesses (3 of 3)
• Transportation network
• Physical and psychological barriers
• Customer traffic
• Adequate parking
• Reputation
• Visibility
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Retail & Service Location Options (1 of 2)
• Central Business Districts (CBDs)
• Neighborhood locations
• Shopping centers and malls
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Shopping Centers and Malls (1 of 5)
• 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
– 5 to 20 stores; anchor is supermarket or drugstore;
serves up to 40,000 people.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Shopping Centers and Malls (2 of 5)
• Community shopping centers
– 15 to 40 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 © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Shopping Centers and Malls (3 of 5)
• 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 © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Shopping Centers and Malls (4 of 5)
• 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
– 40 to 80 stores; anchor is one or more major
department stores; draws customers from a large
trading area, often 5 to 15 miles or more.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Shopping Centers and Malls (5 of 5)
• 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 © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
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 © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Retail & Service Location Options (2 of 2)
• Near competitors
• Shared spaces
• Inside large retail store
• Nontraditional locations
• Home-based businesses
• On the road
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Location Decisions for Manufacturers (1 of 2)
• Foreign trade zones:
– a specially designated area in or near a U.S. customs
port of entry that allows resident companies to import
materials and components from foreign countries;
assemble, process, manufacture, or package them;
and then ship the finished product while either reducing
or eliminating tariffs and duties.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Figure 14.3 How a Foreign Trade Zone Works
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Location Decisions for Manufacturers (2 of 2)
• Foreign trade zones
• Business incubators:
– an organization that combines low-cost, flexible rental
space with a multitude of support services for its small
business residents.
• Accelerator:
– an organization that provides business start-ups a
range of valuable support services in return for a share
of equity, typically 2–10% of the company’s stock,
usually in a “boot camp” experience that lasts only a
few months.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Business Incubators
• Organizations that combine low-cost, flexible rental space
with a multitude of support services for their small business
residents.
• More than 1,500 in operation across the United States.
• They work!
– Companies that “graduate” from incubators have a
success rate of between 75% and 87%.
– 84% of graduates stay in the local community, creating
local job opportunities.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Layout
• Layout:
– The logical arrangement of the physical facilities of a
business that contributes to efficient operations,
increased productivity, and higher sales.
• In the United States, 23% of workers are dissatisfied with
their work environments.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Figure 14.4 Work Space Design Characteristics in
the United States (part a) and Globally (part b)
Source: Based on Steelcase Global Report, 2014, p. 212.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Layout: External Factors (1 of 6)
• 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 © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
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 © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Layout: External Factors (2 of 6)
• 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 © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
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 © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Layout: External Factors (3 of 6)
• Building interiors
– Ergonomics: the science of adapting work and the
work environment to complement employees’ strengths
and to suit customers’ needs.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
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 © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Layout: External Factors (4 of 6)
• Building interiors
– Ergonomics
• Drive-through windows
– Can be a relatively inexpensive way to increase sales.
– Account for 60–70% of sales in quick-service
restaurants.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Layout: External Factors (5 of 6)
• 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 © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Layout: External Factors (6 of 6)
• Sustainability and environmentally friendly design
– Recycled materials; high efficiency lighting, fixtures,
and appliances
– LEED principles
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
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 © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Figure 14.6 Space Values for a Small Store
Source: From Dale M. Lewison, Retailing, 6th ed. Copyright © 1997 by Dale M. Lewison. Reprinted with permission.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Layout for Manufacturers
• Type of product
• Type of production process
• Ergonomic considerations
• Economic considerations
• Space availability within the facility
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Types of Manufacturing Layouts
Three basic layouts:
1. Product
2. Process
3. Fixed position
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Designing Production Layouts
Avoid the seven forms of waste:
1. Transportation
2. Inventory
3. Motion
4. Waiting
5. Overproduction
6. Processing
7. Defects
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
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 © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Copyright

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Chapter ppt_14.pptx

  • 1. Section 3: Launching the Business Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
  • 2. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Essentials of Entrepreneurship and Small Business Management Ninth Edition Chapter 14 Choosing the Right Location and Layout
  • 3. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objectives (1 of 2) 1. Explain the stages in the location decision: choosing the region, the state, the city, and the specific site. 2. Describe the location criteria for retail and service businesses.
  • 4. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objectives (2 of 2) 3. 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. 4. Explain the site selection process for manufacturers. 5. Describe the criteria used to analyze the layout and design considerations of a building, including the Americans with Disabilities Act. 6. Explain the principles of effective layouts for retailers, service businesses, and manufacturers.
  • 5. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 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
  • 6. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Choosing the Region: Sources of Information (1 of 3) • Census data – www.census.gov – http://factfinder.census.gov • Zoom Prospector – http://zoomprospector.com/ • Population Reference Bureau – www.prb.org/DataFinder.aspx
  • 7. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Choosing the Region: Sources of Information (2 of 3) • Zip Code Atlas and Market Planner • Lifestyle Market Analyst • Site Selection • Editor and Publisher Market Guide • The American Marketplace: Demographics and Spending Patterns
  • 8. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Choosing the Region: Sources of Information (3 of 3) • Small Business Development Center – http://sba.gov • Population Reference Bureau – http://prb.org/ • Euromonitor International – http://euromonitor.com/ • OECD – http://oecd.org/
  • 9. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Choosing the State (1 of 4) • Proximity to markets • Proximity to needed raw materials • Wage rates • Labor supply needs • Business climate
  • 10. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Table 14.1 Most and Least Small-Business- Friendly States States Most Friendly to Small Businesses Blank 1. Nevada 6. Washington 2. Texas 7. Indiana 3. South Dakota 8. Arizona 4. Wyoming 9. Alabama 5. Florida 10. Ohio States Least Friendly to Small Businesses Blank 41. Oregon 46. Vermont 42. Iowa 47. Minnesota 43. Connecticut 48. New York 44. Maine 49. New Jersey 45. Hawaii 50. California Source: Based on Raymond J. Keating, Small Business Policy Index 2017, Small Business & Entrepreneurship Council, 21st Annual Edition, February 2017, p. 2.
  • 11. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Choosing the State (2 of 4) • Proximity to markets • Proximity to needed raw materials • Wage rates • Size and quality of labor force • Business climate • Tax rates
  • 12. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Figure 14.1 State Business Tax Climate Index Source: Jared Walczak, Scott Drenkard, and Joseph Henchman, 2017 State Business Tax Climate Index, Tax Foundation, September 28, 2016, p. 1.
  • 13. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Choosing the State (3 of 4) • Proximity to markets • Proximity to needed raw materials • Wage rates • Labor supply needs • Business climate • Tax rates • Internet access
  • 14. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Internet Download Speeds Figure 14.2 Average Internet Peak Download Speeds (Mbps) by State Source: Based on data from “Internet Connection Speed Map,” FastMetrics, 2017, www.fastmetrics.com/internet-connection-speedmap-usa.php#average-speeds-by-state.
  • 15. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Choosing the State (4 of 4) • Proximity to markets • Proximity to needed raw materials • Wage rates • Labor supply needs • Business climate • Tax rates • Internet access • Total operating costs
  • 16. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Table 14.2 State Evaluation Matrix State Weighted Score (Weight * Score) Location Criterion Weight Score (Low = 1, High = 5) State 1 State 2 State 3 Quality of labor force Blank Blank Blank Blank Blank Wage rates Blank Blank Blank Blank Blank Union activity Blank Blank Blank Blank Blank Property/building costs Blank Blank Blank Blank Blank Utility costs Blank Blank Blank Blank Blank Transportation costs Blank Blank Blank Blank Blank Tax burden Blank Blank Blank Blank Blank Educational/training assistance Blank Blank Blank Blank Blank Start-up incentives Blank Blank Blank Blank Blank Raw material availability Blank Blank Blank Blank Blank Quality of life Blank Blank Blank Blank Blank Other: Blank Blank Blank Blank Blank Blank Blank Total Score Blank Blank Blank
  • 17. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Table 14.3 Best and Worst States for Doing Business (1 of 2) Top 10 States for Doing Business Overall Rank* State Taxes and Regulations Rank Based on Workforce Quality Living Environment 1 Texas #6 #5 #10 2 Florida 7 23 9 3 North Carolina 15 10 3 4 Tennessee 4 8 8 5 Indiana 10 4 17 6 Arizona 12 14 11 7 South Carolina 11 19 6 8 Georgia 14 9 7 9 Nevada 3 22 21 10 Ohio 24 7 23
  • 18. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Table 14.3 Best and Worst States for Doing Business (2 of 2) Bottom 10 States for Doing Business Rank* State Taxes and Regulations Workforce Quality Living Environment 41 Rhode Island #44 #37 #39 42 Mississippi 33 48 50 43 Maryland 45 45 41 44 Hawaii 43 49 4 45 Massachusetts 47 16 38 46 Connecticut 48 36 37 47 New Jersey 42 40 48 48 Illinois 46 44 45 49 New York 49 38 47 50 California 50 35 26 *Rank is the result of a survey by Chief Executive magazine that asked 650 business leaders to rank the states on factors such as taxes, regulatory burden, quality of workforce, and quality of life. Source: Based on “2016 Best and Worst States for Business,” Chief Executive, May 6, 2016, http://chiefexecutive.net/2016-best-and-worst-states-forbusiness-full-list/.
  • 19. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Choosing the City (1 of 3) • Population trends
  • 20. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Table 14.4 States with the Most Top Micropolitan Areas State Number of Top 100 Micropolitan Areas Ohio 19 Kentucky 9 Indiana 6 North Carolina 6 Georgia 5 Illinois 5 Tennessee 4 Alabama 4 Nebraska 4 Michigan 4 Source: Based on Ron Starner, “The Findlay Formula Effect,” Site Selection, March 2016, pp. 115–129.
  • 21. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Choosing the City (2 of 3) • Population trends • Competition • Clustering • Compatibility with community • Local laws and regulations – Zoning laws – Variance
  • 22. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Choosing the City (3 of 3) • Appropriate infrastructure • Incentives • Quality of life
  • 23. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 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
  • 24. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Location Criteria for Retail and Service Businesses (1 of 3) • Trade area size: – The region from which a business can expect to draw customers. • Retail compatibility • Degree of competition • Index of retail saturation (IRS)
  • 25. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Index of Retail Saturation C ×RE IRS = 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
  • 26. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Location Criteria for Retail and Service Businesses (2 of 3) • 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
  • 27. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Reilly’s Law of Retail Gravitation 1+ = b a d BP P P where BP = the distance in miles from location A to the break point d = the distance in miles between locations A and B Pb = the population surrounding location B Pa = the population surrounding location A
  • 28. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Location Criteria for Retail and Service Businesses (3 of 3) • Transportation network • Physical and psychological barriers • Customer traffic • Adequate parking • Reputation • Visibility
  • 29. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Retail & Service Location Options (1 of 2) • Central Business Districts (CBDs) • Neighborhood locations • Shopping centers and malls
  • 30. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Shopping Centers and Malls (1 of 5) • 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 – 5 to 20 stores; anchor is supermarket or drugstore; serves up to 40,000 people.
  • 31. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Shopping Centers and Malls (2 of 5) • Community shopping centers – 15 to 40 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.
  • 32. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Shopping Centers and Malls (3 of 5) • 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.
  • 33. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Shopping Centers and Malls (4 of 5) • 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 – 40 to 80 stores; anchor is one or more major department stores; draws customers from a large trading area, often 5 to 15 miles or more.
  • 34. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Shopping Centers and Malls (5 of 5) • 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.
  • 35. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 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?
  • 36. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Retail & Service Location Options (2 of 2) • Near competitors • Shared spaces • Inside large retail store • Nontraditional locations • Home-based businesses • On the road
  • 37. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Location Decisions for Manufacturers (1 of 2) • Foreign trade zones: – a specially designated area in or near a U.S. customs port of entry that allows resident companies to import materials and components from foreign countries; assemble, process, manufacture, or package them; and then ship the finished product while either reducing or eliminating tariffs and duties.
  • 38. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Figure 14.3 How a Foreign Trade Zone Works
  • 39. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Location Decisions for Manufacturers (2 of 2) • Foreign trade zones • Business incubators: – an organization that combines low-cost, flexible rental space with a multitude of support services for its small business residents. • Accelerator: – an organization that provides business start-ups a range of valuable support services in return for a share of equity, typically 2–10% of the company’s stock, usually in a “boot camp” experience that lasts only a few months.
  • 40. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Business Incubators • Organizations that combine low-cost, flexible rental space with a multitude of support services for their small business residents. • More than 1,500 in operation across the United States. • They work! – Companies that “graduate” from incubators have a success rate of between 75% and 87%. – 84% of graduates stay in the local community, creating local job opportunities.
  • 41. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Layout • Layout: – The logical arrangement of the physical facilities of a business that contributes to efficient operations, increased productivity, and higher sales. • In the United States, 23% of workers are dissatisfied with their work environments.
  • 42. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Figure 14.4 Work Space Design Characteristics in the United States (part a) and Globally (part b) Source: Based on Steelcase Global Report, 2014, p. 212.
  • 43. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Layout: External Factors (1 of 6) • 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.
  • 44. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 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.
  • 45. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Layout: External Factors (2 of 6) • 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.
  • 46. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 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.
  • 47. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Layout: External Factors (3 of 6) • Building interiors – Ergonomics: the science of adapting work and the work environment to complement employees’ strengths and to suit customers’ needs.
  • 48. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 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.
  • 49. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Layout: External Factors (4 of 6) • Building interiors – Ergonomics • Drive-through windows – Can be a relatively inexpensive way to increase sales. – Account for 60–70% of sales in quick-service restaurants.
  • 50. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Layout: External Factors (5 of 6) • 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.
  • 51. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Layout: External Factors (6 of 6) • Sustainability and environmentally friendly design – Recycled materials; high efficiency lighting, fixtures, and appliances – LEED principles
  • 52. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 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.
  • 53. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Figure 14.6 Space Values for a Small Store Source: From Dale M. Lewison, Retailing, 6th ed. Copyright © 1997 by Dale M. Lewison. Reprinted with permission.
  • 54. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Layout for Manufacturers • Type of product • Type of production process • Ergonomic considerations • Economic considerations • Space availability within the facility
  • 55. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Types of Manufacturing Layouts Three basic layouts: 1. Product 2. Process 3. Fixed position
  • 56. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Designing Production Layouts Avoid the seven forms of waste: 1. Transportation 2. Inventory 3. Motion 4. Waiting 5. Overproduction 6. Processing 7. Defects
  • 57. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 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.
  • 58. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Copyright

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  1. If this PowerPoint presentation contains mathematical equations, you may need to check that your computer has the following installed: 1) MathType Plugin 2) Math Player (free versions available) 3) NVDA Reader (free versions available)
  2. In this chapter, you will: 1. Explain the stages in the location decision: choosing the region, the state, the city, and the specific site. 2. Describe the location criteria for retail and service businesses.
  3. In addition, you will: 3. 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. 4. Explain the site selection process for manufacturers. 5. Describe the criteria used to analyze the layout and design considerations of a building, including the Americans with Disabilities Act. 6. Explain the principles of effective layouts for retailers, service businesses, and manufacturers.
  4. Entrepreneurs who choose their locations wisely – with their customers’ preferences and their companies’ needs in mind – establish an important competitive advantage over rivals who choose their locations haphazardly.
  5. One of the first stops entrepreneurs should make when conducting a regional evaluation is the U.S. Census Bureau site.
  6. Every state has an economic development office working to recruit new businesses. Even though the publications produced by these offices are biased in favor of locating in that state, they are excellent sources of information and can help entrepreneurs assess the business climate in each state.
  7. This table shows the most and least friendly states for small businesses.
  8. This table shows the states that CEOs rank as the 10 best states and the 10 worst states on factors such as taxes and regulations, quality of workforce, and living environment.
  9. This table shows the states that CEOs rank as the 10 best states and the 10 worst states on factors such as taxes and regulations, quality of workforce, and living environment.
  10. Analyzing over time the lists of “best cities for business” compiled annually by many magazines reveals one consistent trend: Successful small companies in a city tend to track a city’s population growth.
  11. Here are other factors that entrepreneurs should consider when evaluating cities as possible business locations.
  12. The final step in the location selection process is choosing the specific site for the business. Once again, entrepreneurs must let the facts guide them to the best location.
  13. Few decisions are as important for retailers and service firms as the choice of a location. Because their success depends on a steady flow of customers, these businesses must locate their businesses with their target customers’ convenience and preferences in mind.
  14. The index of retail saturation is a measure of the potential sales per square foot of store space for a given product within a specific trading area.
  15. Reilly’s Law of Retail Gravitation, a classic work in market analysis published in 1931 by William J. Reilly, uses the analogy of gravity to estimate the attractiveness of a particular business to potential customers.
  16. There are nine basic areas where retail and service business owners can locate: the central business district, neighborhoods, shopping centers and malls, near competitors, shared spaces, inside large retail stores, nontraditional locations, at home, and on the road.
  17. The typical customer in the United States makes a purchase at a mall or shopping center 5 times per month. Approximately 109,500 shopping centers and 1,050 traditional enclosed malls operate in the United States. In a typical three-month period, 184 million adults, 75% of the adult population in the United States, visit a mall.
  18. When evaluating a mall or shopping center location, an entrepreneur should consider these questions.
  19. The criteria for the location decision for manufacturers are very different from those for retailers and service businesses; however, the decision can have just as much impact on the company’s success.
  20. This figure shows how a foreign trade zone works. More than 2,900 businesses in the United States ship $660 billion worth of goods into and $85 billion worth of goods out of the 186 foreign trade zones that operate in the United States. Another 4,100 FTZs operate in other countries around the globe.
  21. The primary reason for establishing an incubator is to enhance economic development by growing new businesses that create jobs and diversify the local economy. An incubator’s goal is to nurture young companies during the volatile start-up period and help them survive until they are strong enough to go out on their own.
  22. Planning for the most effective and efficient layout in a business environment can produce dramatic improvements in a company’s operating effectiveness, efficiency, and overall performance.
  23. This figure shows work space design characteristics in the United States (part a) and globally (part b). The design of a company’s work space should reflect its character and culture, which is especially important for start-ups that are trying to recruit employees or attract investors.
  24. When creating a layout, managers must consider its impact on the space itself, the people who occupy it, and tasks performed, and the technology they use. These factors have a significant impact on a space’s layout and design.
  25. A store’s window display and in-store displays can be powerful selling tools if used properly.
  26. One of the lowest-cost and most effective methods of communicating with customers is a business sign.
  27. An ergonomically designed workplace can improve workers’ productivity significantly and reduce days lost due to injuries and accidents.
  28. Retailers can increase sales by sending important subconscious signals to customers using what design experts call “symbolics.”
  29. Retailers design their layouts with the goal of maximizing sales revenue and reinforcing the brand.
  30. Retailers have long recognized that some locations within a store are superior to others. Customer traffic patterns give the owner a clue to the best location for the highest gross margin items. Generally, prime selling space should be reserved for products that carry the highest markups.
  31. Manufacturing layout decisions take into consideration the arrangement of departments, workstations, machines, and stock-holding points within a production facility. The objective is to arrange these elements to ensure a smoothly flowing, efficient, and highly productive work flow.
  32. Manufacturing layouts are categorized either by the work flow in a plant or by the production system’s function. There are three basic types of layouts that manufacturers can use separately or in combination – product, process, and fixed position.
  33. An effective layout allows workers to maximize their productivity by providing them the tools and a system for doing their jobs properly.