Entrepreneurship and Small Business Management Chapter 18 Location

Entrepreneurship and Small Business Management Chapter 18 Location, Facilities, and Layout

Ch. 18 Performance Objectives n n Understand the importance of the physical location of a business. Know the key factors to consider in the location decision. Learn how location needs differ by business type. Determine locations via multiple methods. Entrepreneurship and Small Business Management, 1/e 2 © 2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Ch. 18 Performance Objectives (continued) n n n Explore the design of facilities and their layouts. Recognize the special considerations for home-based businesses. Describe location factors for Web-based businesses. Entrepreneurship and Small Business Management, 1/e 3 © 2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Why Is Location Important? n n Determines access to markets Affects essential portions of your cost structure including transportation and distribution Impacts customer satisfaction and overall levels of risk and profitability Can make the difference between business success and failure Entrepreneurship and Small Business Management, 1/e 4 © 2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Factors in Location Decision n n n Access for customers Access to suppliers Climate & geography Convenience Cost of facilities Economic conditions & business incentives Entrepreneurship and Small Business Management, 1/e 5 n n n Demographics Regulations & laws Labor pool Proximity to competitors Visibility © 2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Location Needs Differ by Business Type Wholesalers Manufacturers n n n Customer service Facilities and distribution costs Skilled labor pool Access to suppliers Laws and regulations Entrepreneurship and Small Business Management, 1/e n n 6 Economical distribution costs Proximity to customers and suppliers Tangible costs of facilities Incentives and regulations © 2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Location Needs Differ by Business Type (continued) Service and Professional Retailers n n n Drawing power Demographics Traffic generators Competitor locations Selling space needed Rental costs Entrepreneurship and Small Business Management, 1/e n n n 7 Needs vary considerably Customer convenience and accessibility Demographics Image/positioning Safety/security factors © 2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Evaluating Locations n n Simplest way—select location you know Factor-rating method—prioritize and weight criteria with these steps: 1. Develop a list of critical factors. 2. Determine “weight” of each factor relative to importance. 3. Create a measurement scale. 4. Score each location for each factor using scale. 5. Multiply factor weight times factor score (for each factor in each location). 6. Compare sums of locations’ weighted factors. Entrepreneurship and Small Business Management, 1/e 8 © 2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Evaluating Locations (continued) n n Use geographic information systems which include demographic data, maps, topographic data, major transportation routes, and so on. Use market research to gather demographic, psychographic, geographic, and competition data. Entrepreneurship and Small Business Management, 1/e 9 © 2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Evaluating Locations (continued) n n Location breakeven analysis— calculates and compares fixed and variable costs of each location Center-of-gravity method—used to locate a distribution center by judging: n n Locations of the destinations How much product will ship to destinations Frequency of delivery Cost of delivery Entrepreneurship and Small Business Management, 1/e 10 © 2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Facilities Design and Layout n n n Manufacturing, warehousing, and distribution facilities need space to operate cost effectively. Retail facilities must draw maximum revenue from design and layout. Service and professional firms have individual facility requirements based on business type. Entrepreneurship and Small Business Management, 1/e 11 © 2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Facilities Factors for Manufacturers/Distributors n n n n Capacity for efficient movement of materials, equipment, and people Flexibility to adapt to changing needs Loading docks for deliveries and shipments Environment conducive to work requirements Ability to include vital control regulators Parking for commercial, employee, and visitor vehicles Adequate utility services to the building Security and safety Entrepreneurship and Small Business Management, 1/e 12 © 2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Types of Manufacturing Layouts n n n Product layouts—appropriate for continuous, mass-production processes Process layouts—functional layouts that work well where there are common procedures for varied products Fixed-position layouts—used for production of large objects where materials and teams are brought to a single location Entrepreneurship and Small Business Management, 1/e 13 © 2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Facilities Factors for Retailers n n n Appropriate selling area and configuration of that space Permission to complete necessary changes (or improvements to be done by landlord) Space for offices, storage, restrooms, deliveries, special needs, etc. Signage for rules/regulations Adequate customer parking Lighting and security Entrepreneurship and Small Business Management, 1/e 14 © 2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Retail Store Design and Layout n n Building exterior, window displays and cleanliness, and signage all send messages to customers. Inside layout should be designed to entice customers to purchase. n n Product placement Type of shopping experience desired for the customer Entrepreneurship and Small Business Management, 1/e 15 © 2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Considerations for Home-Based Businesses n n Investigate zoning ordinances, deed restrictions, and civic association rules. Determine how to divide your business area from your family’s living area. Plan for appropriate business furnishings and a separate telephone line. Consider if customers will prefer to visit an office building or store, instead of a home. Entrepreneurship and Small Business Management, 1/e 16 © 2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Location Factors for Web-Based Businesses n n The physical space needed for operations could be as small as a one-room office. Location is more a function of personal preference, cost, or proximity of vendors. Location, facility, and layout decisions should minimize distribution costs and time. Some technology-based companies prefer to cluster with similar firms. Entrepreneurship and Small Business Management, 1/e 17 © 2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.