Académique Documents
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Topics
A. B.
C.
D. E.
New Business
Most start-ups begin life at home, but then need to find extra/different space as the business grows
The business activity The number/location of competitors Reliance on personal visits by customers The methods used to contact customers Reliance on local supplies Reliance on specialised labour skills
Labour
When a start-up needs to hire employees, then access to a reliable pool of staff with relevant skills is important
Businesses that are labour-intensive often look to locate in areas of traditionally low wages
Market Customers & Population A start-up may need to be located near particular centers of population For example, if the product is a service targeted at affluent older-aged people, then it is important to be located where there is a sufficient population of such people
Franchise businesses often analyze the population characteristics of a potential new territory before setting up in a new location
The business may be dependent on supplies of a particular raw material, so costs will be lower if the business is located near the source of supply (e.g. where the raw material is grown or where a distributor is based) This factor tends to be more important for manufacturing businesses rather than service businesses
Relocating = moving
May be necessary if key factors change, eg
New shopping centre opens and competitors relocate New motorway opens and diverts trade/provides new opportunities Methods of contacting customers change (from personal visits to mail order or Internet) New methods of production changes reliance on suppliers Costs increase on existing premises/alternatives would save money
Questions
What types of locations are available to retailers? What are the relative advantages of each location type?
Why are some locations particularly well suited to specific retail strategies? Which types of locations are growing in popularity with retailers?
Location is typically prime consideration in customers store choice. Location decisions have strategic importance because they can help to develop sustainable competitive advantage.
Location decisions are risky: invest or lease?
3. Shopping Centers
Strip Shopping Centers Shopping Malls
Involves evaluating a series of trade-offs between The size of the trade area (geographic area encompassing most of the customers who would patronize a specific retail site) the occupancy cost of the location The pedestrian and vehicle customer traffic The restrictions placed on store operations by the property manager The convenience of the location for
There are relative advantages and disadvantages to consider with each location.
Rent Traffic
1. Freestanding Sites
Freestanding Sites location for individual store unconnected to other retailer Advantages:
Convenience High traffic and visibility Modest occupancy cost Separation from competition Few restrictions
Disadvantages:
No foot traffic
Advantage to Retailers:
Affluence returned Young professionals Returned empty-nesters Incentives to move provided by cities Jobs! Low occupancy costs High pedestrian traffic
Draws people into areas during business hours Hub for public transportation Pedestrian traffic Residents
High security required Shoplifting Parking is poor Evenings and weekends are slow
Occupancy costs lower than CBDs They dont attract as many people There are not as many stores Smaller selections offered Not as much entertainment Some planners restrict store operations
Inner City
Inner city retailers achieve high sales volume, higher margins and higher profits Inner city customer wants branded merchandise
3. Shopping Centers
Shopping Center Management Controls:
Parking Security Parking lot lighting Outdoor signage Advertising Special events for customers
Disadvantages
Limited trade area Lack of entertainment No protection from weather
Power Centers
Shopping centers that consist primarily of collections of big-box retail stores such as discount stores (Target), offprice stores (Marshalls), warehouse clubs (Costco), and category specialists (Lowes, Best Buy, Dicks)
Free-standing anchors
Limited small specialty stores Many located near enclosed malls Low occupancy costs Convenient
Shopping Malls
Regional shopping malls (less than 1 million square feet) Super regional malls (more than 1 million square feet)
Disadvantages:
Occupancy costs are high Tenants may not like mall management control of operations Competition can be intense
7-33
Lifestyle Centers
Open-air configuration
Design ambience and amenities Upscale stores Restaurants and often a cinema or other entertainment Small department store format may be there
Upscale apparel shops Tourist areas/central business districts Need not to be anchored Dcor is elegant High occupancy costs Large trade area
Outlet Centers
These shopping centers contain mostly manufacturers and retail outlet stores
Theme/Festival Centers
Located in places of historic interests or for tourists Anchored by restaurants and entertainment facilities
Airports
Resorts
Store
Airports: Why wait with nothing to do? Rents are 20% higher than malls Sales/square ft are 3-4 times higher than malls Best airports are ones with many connecting flights
Grocery store with service providers (coffee bars, banks, clinics, video outlets)
Procedures for evaluation location alternatives include Factor rating method Load-distance model Center of gravity approach Break-even analysis
Transportation method
A Load-Distance Model Example: Matrix Manufacturing is considering where to locate its warehouse in order to service its four Ohio stores located in Cleveland, Cincinnati, Columbus, Dayton. Two sites are being considered; Mansfield and Springfield, Ohio. Use the load-distance model to make the decision.
dAB 30 10 40 15 45 miles
Multiply by the number of loads between each site and the four cities
The load-distance score for Mansfield is higher than for Springfield. The warehouse should be located in Springfield.
This approach requires that the analyst find the center of gravity of the geographic area being considered
Computing the Center of Gravity for Matrix Manufacturing
Coordinates Load
Location
Cleveland Columbus Cincinnati Dayton Total
(li) 15 10 12 4 41
Computing the Center of Gravity for Matrix Manufacturing liXi 325 7.9 ; Yc.g. liYi 436 10.6 Xc.g. li 41 li 41
Is there another possible warehouse location closer to the Wiley 2007 C.G. that should be considered?? Why?
Break-Even Analysis
Break-even analysis computes the amount of goods required to be sold to just cover costs Break-even analysis includes fixed and variable costs Break-even analysis can be used for location analysis especially when the costs of each location are known
Step 1: For each location, determine the fixed and variable costs Step 2: Plot the total costs for each location on one graph Step 3: Identify ranges of output for which each location has the lowest total cost Step 4: Solve algebraically for the break-even points over the identified ranges
Break-Even Analysis
Remember the break even equations used for calculation total cost of each location and for calculating the breakeven quantity Q. Total cost = F + cQ
Example using Break-even Analysis: Clean-Clothes Cleaners is considering four possible sites for its new operation. They expect to clean 10,000 garments. The table and graph below are used for the analysis.
Example 9.6 Using Break-Even Analysis Location Fixed Cost Variable Cost Total Cost A $350,000 $ 5(10,000) $400,000 B $170,000 $25(10,000) $420,000 C $100,000 $40(10,000) $500,000 D $250,000 $20(10,000) $450,000
From the graph you can see that the two lowest cost intersections occur between C & B (4667 units) and B & A (9000 units) The best alternative up to 4667 units is C, between 4667 and 9000 Wiley 2007 units the best is B, and above 9000 units the best site is A
The transportation method of linear programming can be used to solve specific location problems It is discussed in detail in the supplement to this text It could be used to evaluate the cost impact of adding potential location sites to the network of existing facilities It could also be used to evaluate adding multiple new sites or completely redesigning the network