Entrepreneurship and small business management chapter 18
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Entrepreneurship and
Small Business
Management
Chapter 18
Location, Facilities, and Layout
Ch. 18 Performance
Objectives
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.
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© 2012 Pearson Education, Upper Saddle River, NJ
07458.
Ch. 18 Performance
Objectives
Explore the design of facilities and
(continued)
their layouts.
Recognize the special considerations
for home-based businesses.
Describe location factors for Webbased businesses.
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© 2012 Pearson Education, Upper Saddle River, NJ
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Why Is Location
Important?
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
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© 2012 Pearson Education, Upper Saddle River, NJ
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Factors in Location Decision
Access for customers
Access to suppliers
Climate & geography
Convenience
Cost of facilities
Economic conditions
& business incentives
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Demographics
Regulations &
laws
Labor pool
Proximity to
competitors
Visibility
© 2012 Pearson Education, Upper Saddle River, NJ
07458.
Location Needs Differ by
Business Type
Manufacturers
Wholesalers
Customer service
Facilities and
distribution costs
Skilled labor pool
Access to suppliers
Laws and
regulations
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Economical
distribution costs
Proximity to customers
and suppliers
Tangible costs of
facilities
Incentives and
regulations
© 2012 Pearson Education, Upper Saddle River, NJ
07458.
Location Needs Differ by
Business Type (continued)
Service and
Professional
Retailers
Drawing power
Demographics
Traffic generators
Competitor locations
Selling space
needed
Rental costs
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Needs vary
considerably
Customer convenience
and accessibility
Demographics
Image/positioning
Safety/security factors
© 2012 Pearson Education, Upper Saddle River, NJ
07458.
Evaluating Locations
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.
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© 2012 Pearson Education, Upper Saddle River, NJ
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Evaluating Locations
(continued)
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.
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© 2012 Pearson Education, Upper Saddle River, NJ
07458.
Evaluating Locations
(continued)
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:
Locations of the destinations
How much product will ship to destinations
Frequency of delivery
Cost of delivery
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© 2012 Pearson Education, Upper Saddle River, NJ
07458.
Facilities Design and Layout
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.
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© 2012 Pearson Education, Upper Saddle River, NJ
07458.
Facilities Factors for
Manufacturers/Distributors
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
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© 2012 Pearson Education, Upper Saddle River, NJ
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Types of Manufacturing
Layouts
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
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© 2012 Pearson Education, Upper Saddle River, NJ
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Facilities Factors for Retailers
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
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© 2012 Pearson Education, Upper Saddle River, NJ
07458.
Retail Store Design and
Layout
Building exterior, window displays
and cleanliness, and signage all
send messages to customers.
Inside layout should be designed
to entice customers to purchase.
Product placement
Type of shopping experience desired
for the customer
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© 2012 Pearson Education, Upper Saddle River, NJ
07458.
Considerations for
Home-Based Businesses
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.
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© 2012 Pearson Education, Upper Saddle River, NJ
07458.
Location Factors for
Web-Based Businesses
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.
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Management, 1/e
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© 2012 Pearson Education, Upper Saddle River, NJ
07458.
