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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.
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.
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.
One of the first stops entrepreneurs should make when conducting a regional evaluation is the U.S. Census Bureau site.
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.
This table shows the most and least friendly states for small businesses.
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.
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.
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.
Here are other factors that entrepreneurs should consider when evaluating cities as possible business locations.
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.
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.
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.
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.
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.
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.
When evaluating a mall or shopping center location, an entrepreneur should consider these questions.
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.
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.
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.
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.
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.
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.
A store’s window display and in-store displays can be powerful selling tools if used properly.
One of the lowest-cost and most effective methods of communicating with customers is a business sign.
An ergonomically designed workplace can improve workers’ productivity significantly and reduce days lost due to injuries and accidents.
Retailers can increase sales by sending important subconscious signals to customers using what design experts call “symbolics.”
Retailers design their layouts with the goal of maximizing sales revenue and reinforcing the brand.
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.
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.
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.
An effective layout allows workers to maximize their productivity by providing them the tools and a system for doing their jobs properly.