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CHAPTER 14
Choosing the Right
Location and Layout
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Choosing a Location
 The right region of the country
 The right state in the region
 The right city in the state
 The right site in the city
Copyright © 2011 Pearson Education, Inc. Publishing Ch. 14: Location and Layout as Prentice Hall 14 - 2

Choosing the Region:
Sources of Information
 Census data
 http://www.census.gov/
 http://factfinder.census.gov
 ZoomProspector
 www.zoomprospector.com
 Population Reference Bureau
 www.prb.org
 STAT-USA
 http://www.statusa.gov

 Demographics USA
 Lifestyle Market Analyst
 Survey of Buying Power
 Editor and Publisher Market Guide
 The American Marketplace:
Demographics and Spending Patterns

(continued)
 Commercial Atlas and Marketing Guide
 Zip Code Atlas
 Geographic Information Systems (GIS)
 U.S. Census Department’s TIGER

Geographic Information
Systems (GIS)
 Computerized programs combining
map-drawing with database
management capability.
 Search through virtually any database
and then plot the results on a map.
 Visual display reveals
otherwise hidden trends.

Choosing the State
 Proximity to markets
 Proximity to needed raw materials
 Wage rates
 Labor supply needs
 Business climate
 Tax rates
 Internet access
 Total operating costs

State Evaluation Matrix
State Weighted Score (Weight x Score)
Location Criterion Weight
Score (Low =
1, High = 5) State 1 State 2 State 3
Quality of labor force
Wage rates
Union activity
Property/building costs
Utility costs
Transportation costs
Tax burden
Educational/training assistance
Start-up incentives
Raw material availability
Quality of life
Other:
Other
Total Score
Copyright © 2011 Pearson Education, Inc. Ch. 14: Location and Layout Publishing as Prentice Hall
14 - 8
TABLE 14.1

Choosing the City
 Population trends
 Competition
 Clustering
 Compatibility with community
 Local laws and regulations

Choosing the City
(continued)
 Appropriate infrastructure
 Cost of utilities and public services
 Incentives
 Quality of life

Location Criteria for
Retail and Service
 Trade area size – the region
from which a business can
expect to draw customers
 Retail compatibility
 Degree of competition
 Index of retail saturation (IRS)

Index of Retail Saturation
C x RE
RF
IRS =
Where:
C = Number of customers in the trading area
RE = Retail expenditures equals the average
expenditure per person for the product in
the trading area
RF = Retail facilities = the total square feet of
selling space allocated to the product in
the trading area

Retail and Service
(continued)
 Trade area size – the region
from which a business can
expect to draw customers.
 Retail compatibility.
 Degree of competition.
 Index of retail saturation (IRS).
 Reilly’s law of retail gravitation.

Reilly’s Law of Retail Gravitation
d
P
b
P
a
1
BP


Where:
BP = Distance in miles from location A to the
break point
d = Distance in miles between locations A and B
Pa = Population surrounding location A
Pb = Population surrounding location B
14 - 14

Retail and Service
(continued)
 Transportation network
 Physical and psychological barriers
 Customer traffic
 Adequate parking
 Reputation
 Visibility

Retail & Service Location Options
 Central Business Districts (CBDs)
 Neighborhood locations
 Shopping centers and malls

Shopping Centers and Malls
 Neighborhood shopping centers
 3 to 12 Stores; anchor is supermarket or
drugstore; serves up to 40,000 people.
 Community shopping centers
 12 to 50 stores; anchor is department or variety
store; serves 40,000 to 150,000 people.
 Power centers
 Combine drawing power of a mall with
convenience of neighborhood shopping center;
anchor stores typically occupy 80% of space.

(continued)
 Theme or festival centers
 Employ a unifying theme, often involving
entertainment, to attract tourists.
 Outlet centers
 Feature manufacturers’ and retailers’ outlet
stores selling name-brand goods at discount
prices; usually follows “open air” design.
 Lifestyle centers
 Located near affluent residential
neighborhoods; designed to look more like
a central business district than a shopping
center or mall.

 Regional shopping malls
 50 to 100 stores; anchor is one or more major
department stores; draws customers from a
large trading area, often 5 to 15 miles or more.
 Super-regional shopping malls
 Similar to a regional mall but bigger; trading
area is 25 miles or more in all directions.
 Examples
 Mall of America (Bloomington, MN), the
largest mall in the U.S.
 West Edmonton Mall (West Edmonton,
Canada), the largest mall in North America.

FIGURE 14.1 Shopping Mall Patterns Source: International Council of Shopping Centers.
14 - 20

Retail and Service
Location Options
(continued)
 Near competitors
 Inside large retail store
 Outlying areas
 Home-based businesses

Location Decisions for
Manufacturers
 Foreign trade zones

FIGURE 14.2 How a Foreign Trade Zone (FTZ) Works
14 - 23

Manufacturing Locations
 Foreign trade zones
 Empowerment zones
 Business incubators

Business Incubators
 Organizations that combine low-cost,
flexible rental space with a multitude of
support services for their small business
residents.
 More than 1,100 in operation across the
U.S.
 They work!
 Companies that “graduate” from incubators
have a success rate of 87%.
 84% of graduates stay in the local
community, creating local job opportunities.

FIGURE 14.3 Business Incubator Tenants by Industry
Source: National Business Incubation Association.
14 - 26

Layout
The logical arrangement of the physical
facilities of a business that contributes
to efficient operations, increased
productivity, and higher sales.
 Study:
Employees believe that the quality and
quantity of their work would increase by
an average of 25% with better workplace
design.

Layout: External Factors
 The size must be adequate to
accommodate business needs.
 The appearance must create the proper
image or “personality” for the business
in the customer’s eyes.
 The entrance must invite
customers to come in.

Layout: External Factors
(continued)
 Must comply with Americans with
Disabilities Act (ADA).
 Pay attention to the business sign,
the most direct method of reaching
potential customers.

A Business Sign
 Tells potential customers who you are
and what you’re selling.
 Contrasting colors and simple typeface.
 Should be visible, simple, and clear.
 Should be legible both day and night.
 Must be maintained properly.
 Must comply with
local sign ordinances.

Building Interiors
 Ergonomics is an integral part of any design.
 Proper layout and design pays off in higher
productivity, efficiency, or sales.
 Proper lighting is measured by what is ideal
for the job being done – the use of natural
light can increase retail sales.
 Sound and scent should appeal to all
customers and can boost sales.
 Environmental-friendly design for efficiency
and appeal.

Layout Guidelines
 Know your customers’ buying habits
and plan your layout accordingly.
 Display merchandise as attractively as
your budget will allow.
 Display complementary items together.
 Recognize the value of floor space;
never waste valuable selling space with
non-selling functions.

FIGURE 14.4 Space Values for a Small Store Source: Retailing, 6e, 1997 Prentice Hall ©Dale M.
Lewis
Copyright © 2011 Pearson Education, Inc. Publishing Ch. 6: Franchising and the Entrepreneur as Prentice Hall 14 - 33

Three Retail Layout Patterns
Grid
In addition to the text
 Rectangular with parallel aisles;
formal; controls traffic flow; uses
selling space efficiently.
 Supermarkets and self-service
discount stores.

Free-Form
 Free-flowing; informal; creates
“friendly” environment; flexible.
 Small specialty shops.

Boutique
 Divides store into a series of
individual shopping areas, each
with its own theme; unique
shopping environment.
 Small department stores.

Layout for Manufacturers
 Type of product
 Type of production process
 Ergonomic considerations
 Economic considerations
 Space availability
within the facility

Manufacturing Layouts
 Analyzing production layouts: Avoid
the 7 forms of waste
 Transportation
 Inventory
 Motion
 Waiting
 Overproduction
 Processing
 Defects

Conclusion
Location is an important decision for
businesses in the areas of:
 Retail
 Service
 Manufacturing
The criteria for site selection, layout,
design, and ADA considerations
present challenges and opportunities
for entrepreneurs.

All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted, in any
form or by any means, electronic, mechanical, photocopying,
recording, or otherwise, without the prior written permission of
the publisher. Printed in the United States of America.

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