Factors affecting business location


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Factors affecting business location

  1. 1. Module 10 Lesson 2 Factors Affecting Business Location
  2. 2. <ul><ul><ul><ul><li>Convenience goods : Items bought out of habit and sold in numerous outlets; should be available close to consumer’s home or along the route traveled regularly. Examples: bread, milk, gasoline </li></ul></ul></ul></ul>Appropriate Locations for the Sale of Different Types of Consumer Goods <ul><li>Shopping goods : Items purchased after comparing prices and features; should be located where customers can easily compare prices and features. Examples: cars, clothes, appliances </li></ul>
  3. 3. <ul><li>Specialty goods : Items that consumers purchase infrequently and will make an extra effort to buy; location is not a major factor since customers will go out of their way to make these purchases. Care should be taken to locate near businesses of comparable quality and prices. Examples: specific brands, designer items, or exclusive merchandise </li></ul>Appropriate Locations for the Sale of Different Types of Consumer Goods
  4. 4. Types of business locations <ul><li>Downtown/central shopping district </li></ul><ul><li>Neighborhood shopping center </li></ul><ul><li>Community shopping center </li></ul><ul><li>Regional shopping center or mall </li></ul><ul><li>Super-regional shopping center </li></ul><ul><li>Industrial park </li></ul><ul><li>Stand-alone/freestanding </li></ul><ul><li>Home-based </li></ul>
  5. 5. Downtown Area <ul><li>Centrally located and easily accessible </li></ul><ul><li>Offices and professional businesses </li></ul><ul><li>Varying rental rates depending on the town/city </li></ul>
  6. 6. Neighborhood Shopping Center <ul><li>Close to residential areas to meet the convenience needs of the nearby neighborhood residents </li></ul><ul><li>Usually includes a supermarket or drug store as an anchor tenant </li></ul><ul><li>Suitable location for goods and services purchased frequently </li></ul>
  7. 7. Community Shopping Center <ul><li>Serves residents of many neighborhoods </li></ul><ul><li>Combines convenience goods and shopping goods </li></ul><ul><li>One or two major stores plus 10 or more smaller stores </li></ul><ul><li>Variety or junior department store as anchor tenants </li></ul><ul><li>Rent affordable, but higher than neighborhood shopping center </li></ul>
  8. 8. Regional Shopping Center or Mall <ul><li>Combines three or four anchor stores with 40 or more other stores </li></ul><ul><li>Located to serve several towns or cities in the region </li></ul><ul><li>Less accessible for some customers due to distance customers due to distance </li></ul><ul><li>Rent may be high </li></ul>
  9. 9. Super Regional Shopping Center <ul><li>Extremely large - exceeds 750,000 square feet </li></ul><ul><li>Many anchor stores and hundreds of smaller stores </li></ul><ul><li>Designed to attract customers willing to travel great distances to shop </li></ul><ul><li>Rent very high </li></ul><ul><li>Not recommended for new business owners </li></ul><ul><li>Example: Mall of America </li></ul>
  10. 10. Industrial Park <ul><li>Business properties developed on less expensive sections of land away from housing developments and downtown areas </li></ul><ul><li>May be subsidized by communities in order to attract industrial businesses </li></ul>
  11. 11. Stand-Alone/Free Standing <ul><li>Separate from other businesses </li></ul><ul><li>Often, but not always, located just outside shopping centers </li></ul><ul><li>Dependent on drive-by traffic </li></ul><ul><li>Must advertise </li></ul><ul><li>R ent usually lower </li></ul>
  12. 12. Home-based <ul><li>Located in a private residence </li></ul><ul><li>Suitable for businesses requiring little personal contact with customers or where work is picked up or dropped off </li></ul><ul><li>No rent to pay </li></ul><ul><li>Possible tax savings </li></ul>
  13. 13. Before Selecting a Site, Several Factors to Consider <ul><li>Local competition </li></ul><ul><li>Area population </li></ul><ul><li>Chosen land and/or building </li></ul><ul><li>Features </li></ul><ul><li>Proximity to target customers </li></ul><ul><li>Proximity to other businesses </li></ul>
  14. 14. Local Competition <ul><li>Direct Competition : Businesses selling the same products or services. </li></ul><ul><li>Indirect Competition : Businesses offering different products or services yet competing for the same consumer dollars. </li></ul><ul><li>Complementary Competition : Businesses that sell products or services that can be used with other purchases. </li></ul>
  15. 15. <ul><ul><ul><ul><li>Area Population </li></ul></ul></ul></ul><ul><ul><li>Cultural characteristics – various ethnic backgrounds </li></ul></ul><ul><ul><li>Vocation - what the people in that area do for a living </li></ul></ul><ul><ul><li>Age – important due to purchasing patterns </li></ul></ul><ul><ul><li>Income – how much are the people in the area willing or able to spend </li></ul></ul><ul><ul><li>Mobility - do they have their own transportation or are they dependant on public transportation </li></ul></ul><ul><ul><li>Under-served consumers - people whose needs aren’t being met </li></ul></ul>
  16. 16. Zoning – what types of businesses or other structures can build in the area. See zoning laws. Cost – highly popular area may cost more Traffic patterns - congested, free-flowing, easy access, etc. Chosen Land and/or Building
  17. 17. Other Features of Importance <ul><li>Adequate space </li></ul><ul><li>Safe, well-lighted area </li></ul><ul><li>Easy access and exit </li></ul><ul><li>Adequate parking </li></ul><ul><li>Proximity to target customers </li></ul><ul><li>Proximity to other businesses (helps ensure customer traffic and may boost positive image) </li></ul>