DETERMINING THE RIGHT

LOCATION

Prepared and Presented by Group 7:

Riena Rose C. Gaco Jhone Mark Hebunan
Richmond Santos Marvin Peña
Princess Jay Yadao Evan Darwin Aloc
 TABLE OF CONTENTS

01 WHAT IS RIGHT
LOCATION?
LOCATING THE SMALL
04 MANUFACTURING
FIRM
GENERAL CRITERIA
02 FOR SELECTING A
BUSINESS LOCATION

05 LOCATING THE
SERVICE FIRM

STEPS IN SELECTING A
03 BUSINESS LOCATION
FOR RETAILERS
 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 his business objectives.
 What is the Right Location?
In any given area, there are many possible locations
the SBO can consider as his business location. Plotting
the different locations in a spectrum, one will be
situated on the extreme side of the "right location."
Another will be on the extreme side of the "wrong
location." Those in between the extremes may be
classified as "nearly right" or "nearly wrong."
 Different types of small businesses
need to use different criteria to
determine the right business
General Criteria for location. The criteria for locating the
Selecting a Business retail business will be different from
that of the manufacturing firm and
Location the service business. Some of the
factors in the criteria set, however,
are generally applicable to all types
of small businesses.
 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 that some regions are more
desirable areas of investment than others.
 • Population growth
Selecting the right • Average annual income of Families
Region

• Proximity to Markets
Selecting the • Proximity to supply of raw, materials
Province
• Labor supply
• Business climate

• Population trends
Selecting the • Local laws and regulations
Province
• Competition
• Compatibility with the community
• Transportation
• Public services
• Police and Fire Protection
• Reputation of the location
 Selecting the Province

In a given region, a province may be identified as more promising for a

small business than other provinces. The following factors must be
considered when identifying which province the small business will be
located in:

1. proximity to markets;
2. proximity to a supply of raw materials;
3. labor supply; and
4. business climate.
 Proximity to Markets

Small businesses must be as close 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.

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.

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.
 Business Climate

Small businesses are expected to thrive in places

where they transact business more efficiently. Some
provinces are more business-friendly than others.
They are so because they provide certain incentives
for small businesses like tax holidays, lower fees, and
minimum restrictions.
 Selecting the City or Town

After identifying the province where the small business will be located, the specific city or town within the
province must be selected. In choosing a specific city or town, the following must be considered:
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. reputation of the location

 1. population size and density;
Population Trends
2. growth trends;

In a given province, some 3. family size;

towns grow faster than others 4. age breakdowns;
in terms of population and
income. One or two of these 5. education;
towns may be more 6. income levels;
appropriate as locations for
small businesses especially 7. sex;

when any or all of the 8. religion

following are considered:
9. ethnic groups.
 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 operations. Some towns, for
instance, impose lower business taxes.
Competition
Some towns or cities are already saturated with
certain types of business. If the small business
investor finds a town under consideration with too
much competition in his line of business, he should
shift his attention to another town.
Compatibility with the Community
• The small business must be compatible with the community where it will be located.

Transportation
• The cost of moving the firm's products contributes to the overall costs of operating the business.

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.

Police and Fire Protection

• Towns or cities that do not provide adequate police and fire protection should be ruled out in choosing
a location.

Reputation of the Location

• Some cities and towns have established reputations that may not contribute to the achievement of the
goals of the firm.
Steps in Selecting a Business Location for Retailers

Some location criteria are uniquely applicable to retailers. They may be derived through
three major business location selection steps.

choosing a viable selecting the trading evaluating the specific

community area site
To Determine To Determine To Determine

Viable
Trading Area Trading Area
Community

1. List and evaluate 1. List and evaluate

1. List and evaluate 2. Make final choice 2. Make final choice
2. Make final choice
Considering the Considering the
following factors following factors
Considering the
following factors Pedestrian
Central
Business Traffic Store
District Composition
Vehicular
Economics Traffic Specific site
Shopping
Population Center
Competition Parking Terms of
Free facilities occupancy
Standing
Location Transportation
Choosing a Viable Community

A viable community is one that has

the capacity to provide an adequate
and profitable sales volume for the
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; and

3. competition.
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 of business
establishments.

Population
• Information about the characteristics of the population relevant to the location decision must be
obtained.

1. size of the population of the area under consideration;

2. growth trends of the population;
3. the average income of the potential customers; and
4. population changes in recent years.

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 businesses are located in one area, they may have difficulty in obtaining
the sales volume they desire. Some may get bankrupt in the process.
 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. The following aspects must be considered in trading area analysis:

1. demographic and socioeconomic characteristics of consumers;

2. focus on promotional activities;
3. determination of whether the proposed location will service new customers or
take away business from existing competitors;
4. determination of the number of outlets that can be operated; the geographic
weaknesses of the proposed trading area.
5. Other factors like competition, availability of financial firms, availability of labor,
location of suppliers, legal restriction, and the like.
Composition of the
Trading Area
The trading area consists of the following parts

1. Primary trading area - is where 50 to 60 percent of the retailer's

customers come from. It is closest to where the retail firm is located and
possesses the highest density of customers of the firm.

2. Secondary trading area - is where 20 to 25 percent of the firm's

customers come from.

3. Fringe trading area - is where the remaining customers of the firm

come from.
 Types of Location
Locations are of various types and it is in the best interest of the retailer to
determine which type is best suited for his or her product or service offerings.
Location may be classified as follows:

1. central business district A B

2. shopping center
3. free-standing retailer
INTERIOR SPACES SITES
Is a style of building that Central Business District Is a style of building that
emphasizes function and a emphasizes function and a
streamlined form over streamlined form over
The central business district (CBD) refers to an unplanned shopping area around
ornamentation.  ornamentation. 
the geographic point at which all public transportation systems converge.
The advantages of locating in the CBD are
the following:

1. easy access to public transportation.

2. wide product assortment.

3. variety in images, prices, and services.

4. proximity to commercial activities.

The disadvantages of locating in the CBD are

the following:

1. inadequate parking

2. older stores

3. high rents and taxes

4. traffic and delivery congestion

5. Potentially high crime rate

6. The generally decaying conditions of CBDs

in many cities.
Shopping Center
• A shopping center refers 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.

The shopping center offers the following advantages to retailers:

1. heavy customer traffic resulting from the wide range of product offerings;
2. nearness to population;
3. cooperative planning and sharing of common costs;
4. access to highway and availability of parking;
5. lower crime rate;
6. clean, neat environment; and
7. more than adequate parking space.

The disadvantages of the shopping center are the following:

1. inflexible store hours;

2. high rents;
3. restrictions as to the merchandise the retailer may carry;
4. inflexible operations;
5. The possibility of too much competition; and
6. dominance of smaller stores by the lead (or anchor) store.
 Free-standing Retailer
A free-standing retailer is generally located along major traffic arteries without any adjacent retailers selling competing
products to share traffic.

• The following advantages are inherent to free-standing retailers:

1. lack of direct competition;

2. generally lower rents;
3. freedom in operation and hours;
4. facilities that can be adapted to the individual needs of retailers; and
5. inexpensive parking.

• Free-standing retailers have the following disadvantages:

1. lack of drawing power of complementary stores;

2. difficulties in attracting customers for the initial visit;
3. higher advertising and promotional costs;
4. operating costs that cannot be shared with others;
5. possible cash outlays in constructing the store instead of renting; and
6. zoning ordinances that may restrict some activities.
 Locating the Small
Evaluating the Manufacturing Firm
Specific Site
The small manufacturing
After determining firm is saddled with
the trading area certain limitations in
where the small choosing a location. Big
retail business will cities are desirable
be located. the locations because of their
specific site must proximity to a bigger
be pinpointed. percentage of the
population.
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 be because of the following:

1. the factory produces much waste in processing the materials;

2. the raw materials are perishable and so the factory should be
situated close to the source of raw materials;
3. the raw materials such as iron and stone are very bulky; and
4. distribution methods or expenses make one site more cost-
effective than another.
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:

a. adequacy of shipping facilities;

b. types of buildings available for lease or rent; and
C. distance from factory to market and resulting shipping costs.

3. Determine the availability of the following:

a. cheap fuel;
b. power and water;
C. skilled labor (if required); and
d. financing facilities.
 Locating the Service Firm

Service firms are those specifically sought by

customers. If the customers are satisfied with the
services they provide, they will be continuously
patronized even if a competitor is more
accessible.
Thank You!!!