Selecting the Location and Planning the Facilities

Looking Ahead After studying this chapter, you should be able to: 1. Describe the factors affecting the choice of a bricks-andmortar business location. 2. Discuss the challenges of designing and equipping a physical facility. 3. Describe the attraction and challenges of a home-based business. 4. Understand the potential benefits of locating a start-up on the Internet. Chapter 11 Copyright 2010 by Nelson Education Ltd. 11-2

Key Factors in the Location Decision Customer accessibility As a matter of access by target customers As a matter of customer convenience As a necessity to avoid shipping costs Environmental business conditions Climate-related factors Business environment factors Competitors, legal requirements, and tax structure continued Chapter 11 Copyright 2010 by Nelson Education Ltd. 11-3

Key Factors in the Location Decision Resource Availability Nearness to raw materials Availability of a suitable labour supply Access to adequate and reliable transportation Personal Preference of the Entrepreneur Familiarity with home community Familiarity of community with entrepreneur Chapter 11 Copyright 2010 by Nelson Education Ltd. 11-4 continued

Key Factors in the Location Decision Site Availability and Costs Difficulty of locating a good site Business incubator provides shared space, services, and management assistance for new businesses Large costs for and commitment required to purchase site outright. Leasing avoids a large cash outlay and allows the owners to postpone committing to the site before the business becomes a success. Chapter 11 Copyright 2010 by Nelson Education Ltd. 11-5

Designing the Physical Facilities Functional Requirements Physical facilities should be of adequate size and accommodation Ideal building is one that matches the functional requirements of the business Considerations include: Age and condition of building Fire hazards Heating and air conditioning Lighting and restroom facilities Entrances and exits Chapter 11 Copyright 2010 by Nelson Education Ltd. 11-7

Factory Layout Factory Layout Process layout A factory design that groups similar machines together A machine shop with drill presses separate from lathes Product layout A factory design that arranges machines according to their roles in the production process Product is moved progressively from one work station to the next Chapter 11 Copyright 2010 by Nelson Education Ltd. 11-9

Retail Store Layout Retail Store Layout Grid pattern A block-like layout that provides for good merchandise exposure and simplifies security and cleaning Free-flow pattern A flexible layout that is visually appealing and gives the customers the freedom of movement Self-service layout A design that gives customers direct access to merchandise Chapter 11 Copyright 2010 by Nelson Education Ltd. 11-11

Challenging in Equipping the Physical Facilities Manufacturing Equipment General-purpose equipment Machines that serve many functions in the production system Special-purpose equipment Machines designed to serve specialized functions in the production process Chapter 11 Copyright 2010 by Nelson Education Ltd. 11-13 continued

Equipping the Physical Facilities General-Purpose Equipment Low purchase cost Flexible production Good resale value Special-Purpose Equipment Low labour cost High hourly output Chapter 11 Copyright 2010 by Nelson Education Ltd. 11-14

Office Equipment Challenging to keep pace with technology Computers Networks, e-mail Fax machines Copiers and printers Telephone systems Voice mail Interactive voice response (IVR) Chapter 11 Copyright 2010 by Nelson Education Ltd. 11-15

Advantages Home-Based Businesses Low start-up and overhead costs Convenience for family and lifestyle Technology Advances in office equipment allow home-based business to compete with commercial sites Chapter 11 Copyright 2010 by Nelson Education Ltd. 11-16

Challenges of Home-Based Businesses Challenges Family and business conflicts The need to observe regular business hours and establish spatial boundaries (specific work areas) to avoid distractions. Business image of a home-based business Professional image is difficult to maintain in a home environment. Legal considerations Local laws and zoning ordinances prohibit many types of homebased businesses. Chapter 11 Copyright 2010 by Nelson Education Ltd. 11-17

E-commerce Locating on the Web: E-Terms The paperless exchange of business information via the Internet ecrm (Electronic Customer Relationship Marketing) An electronically based system that emphasizes customer relationships Utilizes a customer-centric database E-tailing Round the clock electronic access to products/services Chapter 11 Copyright 2010 by Nelson Education Ltd. 11-18

Benefits of E-Commerce Compete with bigger businesses on a level playing field Access to worldwide customers Compresses the sales cycle great for cash flow Enhancing customer service and CRM through technology Chapter 11 Copyright 2010 by Nelson Education Ltd. 11-19

Drawbacks of E-Commerce Technical limitations Cost of developing / maintaining website Bandwidth and access issues Changing software and hardware Nontechnical limitations Privacy and security Intangibility Global language/culture barriers Chapter 11 Copyright 2010 by Nelson Education Ltd. 11-20

B2B and B2C Business Models B2B (business-to-business) based on selling to business customers electronically B2C (business-to-consumer) based on having final consumers as customers 24/7 e-tailing provides round the clock access to products and services Chapter 11 Copyright 2010 by Nelson Education Ltd. 11-22

Auction Sites Web-based businesses offering participants the ability to list the products for bidding Examples include e-bay, bidz.com, and Yahoo auctions Chapter 11 Copyright 2010 by Nelson Education Ltd. 11-23