Marketing 24 ppt.

DETERMINING THE RIGHT
LOCATION

REPORTED BY: COURSE & YEAR:
Vladimir Amadeus BSBA – 3
Felizco Medina
Jennifer Salazar DATE:
March 1, 2012 –
PROFESSOR: Thursday
Mr. Poblete

2

Determining the Right
Location

• One of the most important decisions the small
business operator has to make is choosing the
right location for his business. The location
decision must be made before actual operations
begin. The wrong location will make it very
difficult for the SBO to achieve business
objectives.

3

Location

WHAT IS THE RIGHT LOCATION?
• The right location refers to that one which will
bring the highest possible benefits to the firm.
The wrong location on the other hand is one
which will bring the most disadvantages to the
small business.

4

Location

GENERAL CRITERIA FOR SELECTING A
BUSINESS LOCATION
• Different types of small business need to use
different sets of criteria in determining the right
business location. The criteria for locating the
retail business will be different from that of the
manufacturing firm and the service business.
Some of the factors in the criteria set, however,
are generally applicable to all types of small
business. These refer to those which concern the
region, the province, and the city or town.

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Location

SELECTING THE REGION
• A mere look at the statistical reports on the
growth patterns and economic performance of
the nation’s different regions will reveal
information the some regions are more desirable
areas of investment than others.

6

Location

SELECTING PROVINCES
1. Proximity to Markets
2. Proximity to Supply of Raw Materials
3. Labor Supply
4. Business Climate

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Location

SELECTING PROVINCES
1. 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.

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Location

SELECTING PROVINCES
2. 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.

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Location

SELECTING PROVINCES
3. 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.

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Location

SELECTING PROVINCES
4. 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.

GENERAL CRITERIA FOR
SELECTING BUSINESS LOCATION

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Location

Mode Criteria
•Population Growth
Selecting the Right •Average Annual Income Of Families
Region

•Proximity to Markets
Selecting the Province
•Proximity to Supply of Raw Materials
•Labor Supply
•Business Climate

Selecting 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

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Location

SELECTING THE CITY OR TOWN
1. Population Trends
2. Local Laws And Regulations
3. Competition
4. Compatibility With The Community
5. Transportation
6. Public Services
7. Police And Fire Protection
8. The Reputation Of The Location

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Location

2. 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
business operation. Some towns, for
instance, impose lower business taxes.

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Location

3. 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. On the negative
side, competition may result in duplication of
efforts.

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Location

4. Compatibility with the Community
▫ The small business must be compatible with the
community it is located.

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Location

5. Transportation
▫ The cost of moving firm’s products contributes to
the overall costs of operating the business.

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Location

6. Police and Fire Protection
▫ Towns or cities that do not provide adequate
police and fire protection should be ruled out in
choosing a location.

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Location

7. 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.

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Location

8. 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.

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Location

STEPS IN SELECTING BUSINESS
LOCATION FOR RETAILERS
• Some 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 Community
2. Selecting The Trading Area
3. Evaluating The Specific Site

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Location

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. Economics
2. Population
3. Competition

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Location

1. Economics
 Areas with a stable economic base must be chosen by
the SBO rather than those without a stable economic
base. An economically stable area is one which has a
balanced mix or business establishment. Areas with few
types of businesses must be reviewed with some
concern.

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Location

2. 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

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Location

3. Competition
 No matter how large an area is, it can only support a
certain number of competing firms. If too many of the
same types of business are located in one area, they
may have difficulty in obtaining the sales volume they
desire. Some may get bankrupt in the process.

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Location

2. Selecting the Trading Area
 The trading area is the geographic area from which a
business draws its customers. In choosing a business
location, several trading areas must be considered
and evaluated.

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Location

 The following aspects must be considered in trading
area analysis:
1. The demographic and socioeconomic of customers;
2. The focus of promotional activities;
3. The determination of whether the proposed location
will service new customers or take away business from
existing competitors;

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Location

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 financial
firms, availability of labor, location of suppliers, legal
restrictions, and the like.

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Location

3. Composition Of the Trading Area
 The trading area consists of the following parts:
• Primary Trading Area – This is where 50 to 60 percent
of the retailer’s customers come from.
• Secondary Trading Area – This is where 20 to 25
percent of the firm’s customers come from.
• Fringe Trading Area – This is where the remaining
customers of the firm come from.

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Location

TYPES OF LOCATION

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Location

TYPES OF LOCATION
 Location may be classified as follows:
 The Central Business District
 The Shopping Center; and
 The free-standing location

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Location

TYPES OF LOCATION
• The Central Business District (CBD)
▫ refers to an unplanned shopping area around the
geographic point at which all public
transportation systems converge.

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Location

TYPES 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

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Location

TYPES 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

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Location

TYPES 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.

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Location

TYPES 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.

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Location

TYPES 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;

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Location

TYPES 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.

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Location

TYPES 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.

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Location

TYPES OF LOCATION
• Free-Standing Retailer
▫ generally located along major traffic arteries
without any adjacent retailers competing products
to share traffic.

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Location

TYPES 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

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Location

TYPES 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

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Location

TYPES 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

45

Location

SELECTING THE SPECIFIC SITE
• After determining the trading area where the
small retail business will be located, the specific
site must be pinpointed. But first, a listing of
possible specific sites must be made.

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Location

• This will be followed by evaluation of the listed
sites considering the following:
• Pedestrian traffic • Vehicular traffic

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Location

• Parking Facilities • Transportation

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Location

• Store composition
• Internal characteristics of the specific sites and
• Terms of occupancy

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Location

• 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

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Location

• 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

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Location

LOCATING THE SMALL
MANUFACTURING FIRM
• Big cites are desirable locations because of
proximity to a bigger percentage of the
population.
• However, zoning laws implemented in big cities
are more restrictive than those imposed by small
towns.
• To avoid the said difficulty, some manufacturing
firms locate in small town just outside the
boundary of the city.

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Location

LOCATING THE SMALL
MANUFACTURING FIRM
• Even if some manufacturing firms wanted to be
near their market, they cannot afford to be
situated away from the source of their raw
materials. 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

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Location

LOCATING THE SMALL
MANUFACTURING 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.

PROCEDURES IN LOCATING A
SMALL MANUFACTURING FIRM

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Location

PROCEDURE IN LOCATING A SMALL
MANUFACTURING FIRM
• In locating a small manufacturing firm, the
following specific steps are recommended:
1. Determine if the proposed area allows the type
of 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 resulting
shipping costs.

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Location

MANUFACTURING FIRM
3. Determine the availability of the following:
a. Cheap fuel
b. Power and water
c. Skilled labor (if required) and
d. Financing facilities

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Location

MANUFACTURING 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.

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Location

It’s Over!!!

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Location

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