1. DETERMINING THE RIGHT LOCATIONREPORTED BY: COURSE & YEAR:Vladimir Amadeus BSBA 3Felizco MedinaJennifer Salazar DATE: March 1, 2012 PROFESSOR: ThursdayMr. Poblete

2. 2 Determining the RightLocation One of the most important decisions the smallbusiness operator has to make is choosing theright location for his business. The locationdecision must be made before actual operationsbegin. The wrong location will make it verydifficult for the SBO to achieve businessobjectives. 3. 3Determining the Right LocationWHAT IS THE RIGHT LOCATION? The right location refers to that one which willbring the highest possible benefits to the firm.The wrong location on the other hand is onewhich will bring the most disadvantages to thesmall business. 4. 4Determining the Right LocationGENERAL CRITERIA FOR SELECTING ABUSINESS LOCATION Different types of small business need to usedifferent sets of criteria in determining the rightbusiness location. The criteria for locating theretail business will be different from that of themanufacturing firm and the service business.Some of the factors in the criteria set, however,are generally applicable to all types of smallbusiness. These refer to those which concern theregion, the province, and the city or town. 5. 5 Determining the RightLocationSELECTING THE REGION A mere look at the statistical reports on thegrowth patterns and economic performance ofthe nations different regions will revealinformation the some regions are more desirableareas of investment than others. 6. 6 Determining the RightLocationSELECTING PROVINCES1. Proximity to Markets2. Proximity to Supply of Raw Materials3. Labor Supply4. Business Climate 7. 7 Determining the RightLocationSELECTING PROVINCES1. Proximity to Markets Small business must be as near to their markets as possible. This is most especially true if the cost of moving the products from the firm to its customers is high in relation to their value. 8. 8 Determining the RightLocationSELECTING PROVINCES2. Proximity to Supply of Raw Materials When the raw material requirements of a small firm are voluminous and frequent acquisitions are made, the company must consider locating in the province where the raw materials are sourced. This will provide the firm with the advantage of reducing considerably its raw material acquisition costs. 9. 9 Determining the RightLocationSELECTING PROVINCES3. Labor Supply The small business must be located in the province where its labor requirements will be supplied sufficiently. The labor requirements that are classified as 1. Managerial, 2. Specialists, and 3. Skilled laborers, must be available. 10. 10Determining the Right LocationSELECTING PROVINCES4. Business Climate Small businesses are expected to thrive places where they transact business more effectively. Some provinces are more business friendly than others. They are so because they provide certain incentives for small business like tax holidays, lower fees, minimum restrictions and others. 11. GENERAL CRITERIA FORSELECTING BUSINESS LOCATION 12. 12Determining the Right Location ModeCriteria Population Growth Selecting the Right Average Annual Income Of Families Region Proximity to MarketsSelecting the Province Proximity to Supply of Raw Materials Labor Supply Business ClimateSelecting the City or Town Population Trends Local Laws and Regulations Competition Compatibility With the Community Transportation Public Services Police and Fire Protection Reputation of the Location 13. 13Determining the Right LocationSELECTING THE CITY OR TOWN1. Population Trends2. Local Laws And Regulations3. Competition4. Compatibility With The Community5. Transportation6. Public Services7. Police And Fire Protection8. The Reputation Of The Location 14. 14Determining the Right LocationSELECTING THE CITY OR TOWN2. Local Laws and Regulations The small business investor must compare the local laws and regulations of the different towns within the province of his choice. He will find out that some towns provide a climate conducive to small business operation. Some towns, for instances provide a climate conducive to small businessoperation. Sometowns, for instance, impose lower business taxes. 15. 15 Determining the RightLocationSELECTING THE CITY OR TOWN3. Competition It is rivalry of two or more businesses that target the same customers. Business competition tends to result in increased efficiency as firms attempt to reduce expenses. Onthe negative side, competition may result in duplication of efforts. 16. 16 Determining the RightLocationSELECTING THE CITY OR TOWN4. Compatibility with the Community The small business must be compatible with the community it is located. 17. 17 Determining the RightLocationSELECTING THE CITY OR TOWN5. Transportation The cost of moving firms products contributes to the overall costs of operating the business. 18. 18 Determining the RightLocationSELECTING THE CITY OR TOWN6. Police and Fire Protection Towns or cities that do not provide adequate police and fire protection should be ruled out in choosing a location. 19. 19Determining the Right LocationSELECTING THE CITY OR TOWN7. Public Services Towns or cities which provide adequate services like those on water and sewerage, trash and garbage collection, among others, must be regarded as plus factors in choosing a location. 20. 20 Determining the RightLocationSELECTING THE CITY OR TOWN8. The Reputation of the Location Some cities and towns have established reputations which may not contribute to the achievement of the goals of the firms. However, cities like Makati, Cebu, or Davao lend their reputations to business located in their areas. In a way, prospective customers are easily swayed to pay attention to whatever message small business would want to convey to them. 21. 21Determining the Right LocationSTEPS IN SELECTING BUSINESSLOCATION FOR RETAILERSSome location criteria are uniquely applicable to retailers. They may be derived through three major business location selection steps. The steps are classified as follows:1. Choosing A Viable Community2. Selecting The Trading Area3. Evaluating The Specific Site 22. 22 Determining the RightLocationSTEPS IN SELECTING BUSINESSLOCATION FOR RETAILERS 1. Choosing a Viable Community A viable community is one that has the capacity to provide an adequate and profitable sales volume for small business. In terms of viability, there are three general factors used to determine the best geographic area or city for the business. They are the following:1. Economics2. Population3. Competition 23. 23 Determining the RightLocationSTEPS IN SELECTING BUSINESSLOCATION FOR RETAILERS 1. Choosing a Viable Community1. Economics Areas with a stable economic base must be chosen bythe SBO rather than those without a stable economicbase. An economically stable area is one which has abalanced mix or business establishment. Areas with fewtypes of businesses must be reviewed with someconcern. 24. 24 Determining the RightLocationSTEPS IN SELECTING BUSINESSLOCATION FOR RETAILERS 1. Choosing a Viable Community2. Population Information about characteristics of population relevant to the location decision must be obtained. The following are important aspects that must be reviewed: 1. Size of Population Of The Area Under Consideration 2. Growth Trend Of The Population 3. Average Income Of The Potential Customers 4. Population Changes In Recent Years 25. 25 Determining the RightLocationSTEPS IN SELECTING BUSINESSLOCATION FOR RETAILERS 1. Choosing a Viable Community3. Competition No matter how large an area is, it can only support acertain number of competing firms. If too many of thesame types of business are located in one area, theymay have difficulty in obtaining the sales volume theydesire. Some may get bankrupt in the process. 26. 26 Determining the RightLocationSTEPS IN SELECTING BUSINESSLOCATION FOR RETAILERS 2. Selecting the Trading Area The trading area is the geographic area from which abusiness draws its customers. In choosing a businesslocation, several trading areas must be consideredand evaluated. 27. 27Determining the Right LocationSTEPS IN SELECTING BUSINESSLOCATION FOR RETAILERS 2. Selecting the Trading Area The following aspects must be considered in tradingarea analysis: 1. The demographic and socioeconomic of customers; 2. The focus of promotional activities; 3. The determination of whether the proposed locationwill service new customers or take away business fromexisting competitors; 28. 28 Determining the RightLocationSTEPS IN SELECTING BUSINESSLOCATION FOR RETAILERS 2. Selecting the Trading Area 4. The determination of the number of outlets that can be operated; the geographic weaknesses of the proposed trading area; and 5. Other factors like competition, availability of financialfirms, availability of labor, location of suppliers, legalrestrictions, and the like. 29. 29Determining the Right LocationSTEPS IN SELECTING BUSINESSLOCATION FOR RETAILERS 3. Composition Of the Trading Area The trading area consists of the following parts: Primary Trading Area This is where 50 to 60 percentof the retailers customers come from. Secondary Trading Area This is where 20 to 25percent of the firms customers come from. Fringe Trading Area This is where the remainingcustomers of the firm come from. 30. 31Determining the Right LocationTYPES OF LOCATION 31. 32 Determining the RightLocationTYPES OF LOCATION Location may be classified as follows: The Central Business District The Shopping Center; and The free-standing location 32. 33Determining the Right LocationTYPES OF LOCATION The Central Business District (CBD) refers to an unplanned shopping area around the geographicpointat which allpublic transportation systems converge. 33. 34 Determining the RightLocationTYPES OF LOCATION Advantages of locating in the CBD: Easy access to public transportation Wide product assortment Variety in images, prices, and services, and Proximity to commercial activities 34. 35Determining the Right LocationTYPES OF LOCATION Disadvantages of locating in the CBD: Inadequate parking Older stores High rents and taxes Traffic and delivery congestion Potentially high crime rate; and The generally decaying conditions of CBDs in many cities 35. 36 Determining the RightLocationTYPES OF LOCATION Secondary Business Districts (SBD) a shopping area smaller than a CBD and which revolves around at least one department or variety stores at a major street intersection. 36. 37Determining the Right LocationTYPES OF LOCATION The Shopping Center to a centrally owned and/or managed shopping district which is planned, has balanced tenancy (the stores complement each other in merchandise offerings), and is surrounded by parking facilities. 37. 38 Determining the RightLocationTYPES OF LOCATION Advantages of Shopping Center: Heavy customer traffic resulting from the wide range of product offerings; Nearness to population; Cooperative planning and sharing of common costs; 38. 39Determining the Right LocationTYPES OF LOCATION Advantages of Shopping Center: Access to highway and availability of parking; Lower crime rate; Clean, neat environment; and More than adequate parking space. 39. 40Determining the Right LocationTYPES OF LOCATION Disadvantages of Shopping Center: Inflexible store hours; High rents; Restrictions as to the merchandise the retailer may carry; Inflexible operations; Possibility of too much competition; and Dominance of smaller stores by the lead (or anchor) store. 40. 41 Determining the RightLocationTYPES OF LOCATION Free-Standing Retailer generally located along major traffic arteries without any adjacent retailers competing products to share traffic. 41. 42 Determining the RightLocationTYPES OF LOCATION Advantages of Free-Standing Retailers: Lack of direct competition Generally lower rents Freedom in operation and hours Facilities that can be adapted to individual needs of retailers and Inexpensive parking 42. 43Determining the Right LocationTYPES OF LOCATION Disadvantages of Free-Standing Retailers: Lack of drawing power of complementary stores Difficulties in attracting customers for the initial visit Higher advertising and promotional costs 43. 44 Determining the RightLocationTYPES OF LOCATION Disadvantages of Free-Standing Retailers: Operating costs that cannot be shared with others Possible cash outlays in constructing the store instead of renting and Zoning ordinances that may restrict some activities 44. 45Determining the Right LocationSELECTING THE SPECIFIC SITE After determining the trading area where thesmall retail business will be located, the specificsite must be pinpointed. But first, a listing ofpossible specific sites must be made. 45. 46 Determining the RightLocationSELECTING THE SPECIFIC SITE This will be followed by evaluation of the listedsites considering the following: Pedestrian traffic Vehicular traffic 46. 47 Determining the RightLocationSELECTING THE SPECIFIC SITE This will be followed by evaluation of the listedsites considering the following: Parking Facilities Transportation 47. 48 Determining the RightLocationSELECTING THE SPECIFIC SITE This will be followed by evaluation of the listedsites considering the following: Store composition Internal characteristics of the specific sites and Terms of occupancy 48. 49 Determining the RightLocationSELECTING THE SPECIFIC SITE Among these that must be considered are: Visibility of the site Placement in the location Size and shape of the lot Size and shape of the building and Condition of the lot and building 49. 50Determining the Right LocationSELECTING THE SPECIFIC SITE The following must be scrutinized: Ownership and lease options Operations and maintenance costs Taxes Zoning restrictions Voluntary restrictions like uniform store hours and cooperative forces 50. 51Determining the Right LocationLOCATING THE SMALLMANUFACTURING FIRM Big cites are desirable locations because ofproximity to a bigger percentage of thepopulation. However, zoning laws implemented in big citiesare more restrictive than those imposed by smalltowns. To avoid the said difficulty, some manufacturingfirms locate in small town just outside theboundary of the city. 51. 52 Determining the RightLocationLOCATING THE SMALLMANUFACTURING FIRM Even if some manufacturing firms wanted to benear their market, they cannot afford to besituated away from the source of their rawmaterials. This may because of the following: The factory produces much waste in processing the materials The raw materials are perishable and so the factory should be situated close to the source of raw materials 52. 53 Determining the RightLocationLOCATING THE SMALLMANUFACTURING FIRM The raw materials such as iron and stone are very bulky and Distribution methods or expenses make one site more cost-effective than another. 53. PROCEDURES IN LOCATING ASMALL MANUFACTURING FIRM 54. 55 Determining the RightLocationPROCEDURE IN LOCATING A SMALLMANUFACTURING FIRM In locating a small manufacturing firm, thefollowing specific steps are recommended: 1. Determine if the proposed area allows the typeof manufacturing under consideration. 2. Determine the following: 1. Adequacy of shipping facilities 2. Types of buildings available for lease or rent and 3. Distance from factory to market and resultingshipping costs. 55. 56Determining the Right LocationPROCEDURE IN LOCATING A SMALLMANUFACTURING FIRM 3. Determine the availability of the following:a. Cheap fuelb. Power and waterc. Skilled labor (if required) andd. Financing facilities 56. 57 Determining the RightLocationPROCEDURE IN LOCATING A SMALLMANUFACTURING FIRM Locating the Service Firm Service the firms are those specifically sought by customers. The choice of a location for service firms will depend on the traits of the target customer. 57. 58 Determining the RightLocationIts Over!!! 58. 59Determining the Right Location