Chapter 14:
Choosing the right
location and layout
Nguyen Vo Hien Chau
International University
Norman/Nguyen Vo Hien Chau
1. Explain the stages in the location decision:
choosing the region, the state, the city, and the
specific site.
2. Describe the location criteria for retail and
service businesses.
3. Outline the location options for retail and
service businesses: central business districts,
Learning neighborhoods, shopping centers and malls, near
competitors, shared spaces, inside large retail
Objectives stores, nontraditional locations, at home, and on
the road.
4. Explain the site selection process for
manufacturers.
5. Describe the criteria used to analyze the layout
and design considerations of a building, including
the Americans with Disabilities Act.
6. Explain the principles of effective layouts for
retailers, service businesses, and manufacturers.
Norman/Nguyen Vo Hien Chau
Location: A
• Select a particular region of the country.
Source of • Choose the right state
Competitive • The right city
Advantage • The right site within the city.
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- Rapid growth in population of a
certain age group
- Rising disposable income
- Infrastructure
Choosing - Available workforce (quantity and
quality)
the right - Low operating cost
- Proximity to market, essential
state, city services and raw materials
- General business climate
- Tax rates
- Internet access
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• https://www.gso.gov.vn/en/population/
Norman/Nguyen Vo Hien Chau
• https://www.gso.gov.vn/en/population/
Norman/Nguyen Vo Hien Chau
Choosing the right site
Every business has its own unique
set of criteria for an ideal location
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Manufacturer
• Access to raw materials, suppliers, labor, transportation, and customers
Service firm
• Access to customers but can generally survive in lower-rent
properties
Retailer
• Sufficient customer traffic
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An entrepreneur who is planning to launch
a convenience store should know that:
500-1000 people
Generating a sufficient volume
1 mile of sales requires a population
of at least 500 to 1,000 people
who live within a one-mile
radius of the outlet and choose
a location accordingly.
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Location Criteria for Retail and Service Businesses
• Trade Area Size
the region from which a business can expect to draw
customers over a reasonable time span
•
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• Retail Compatibility
the benefits a company receives by locating near other businesses
that sell complementary products and services or that generate high
volumes of traffic.
• In the picture: To Hien Thanh Street (Street of Furniture, Bathroom
supplies, ceramics, house decoration)
Norman/Nguyen Vo Hien Chau
Location Criteria for Retail and Service
Businesses
• Degree of Competition
The size, location, and activity of competing businesses also influence
the size of a company’s trading area.
• The Index of Retail Saturation
a measure of the potential sales per square foot of store space for a
given product within a specific trading area; it is the ratio of a trading
area’s sales potential for a product or service to its sales capacity
Locating in an area already saturated with competitors results in
dismal sales volume and often leads to failure.
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Coffee Store in HCMC (District 1)
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The Index of Retail Saturation
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<
<$175
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Location Criteria for Retail and Service
Businesses
• Transportation Network
easy customer access from a smoothly flowing network
of highways and roads is essential
• Ex: Near Train station, near bus station, near crowded and
big crossroad
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Location Criteria for Retail and Service
Businesses
• Physical and Psychological
Barriers
- Physical barriers may be
parks, rivers, lakes, bridges,
or any other natural or man-
made obstruction
- Psychological barriers
include areas that have a
reputation for crime and
illegal activities
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Location Criteria for Retail and Service
Businesses
• Customer Traffic: the number of potential customers
passing by the site during business hours
The key success factor for many retail stores is a high-volume
location with easy accessibility.
Adequate Parking
Reputation: Sites in which businesses have failed repeatedly
create negative impressions in customers’ minds
Visibility: Highly visible locations simply make it easy
for customers to find a business and make purchases
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Location Options for Retail and Service
Businesses
• Central Business District
• Neighborhood Locations
• Shopping Centers and Malls
• Near Competitors
• Shared Spaces
• Inside Large Retail Stores
• Nontraditional Locations: airports, museums,
office buildings, churches, casinos, college and
university campuses, athletic arenas, and others
that offer high concentrations of potential
customers
• Home-Based Businesses
• On the Road
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Shopping Center
• Is there a good fit with other products and brands sold in the mall
or center?
• Who are the other tenants? Which stores are the anchors that will
bring people into the mall or center?
• Demographically, is the center a good fit for your products or
services? What are its customer demographics?
• How much foot traffic does the mall or center generate? How
much traffic passes the specific site you are considering?
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• Your business is a cheap-medium fashion brand in Vietnam,
which shopping center should you choose to locate your store?
1. Vincom Center
2. Landmark
3. Takashimaya
4. Aeon Mall
5. Van Hanh Mall
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Shopping Center
• What is the mall’s average sales per square foot (a
common metric for measuring a mall’s
attractiveness?
• How much vehicle traffic does the mall or center
generate?
• What is the mall’s vacancy rate? What is the
turnover rate of its tenants?
• How much is the rent, and how is it calculated?
• Most mall tenants pay a base amount of rent plus a
small percentage of their sales above a specified
level.
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Share Spaces
Coworking: a situation in
which two or more small
companies share
the same space.
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Inside large retail stores
The world’s largest retailer,
Wal-Mart, is a host to several
small businesses, including
franchisees of national
chains Subway, McDonald’s,
Seattle’s Best Coffee, and
others
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The Location Decision for Manufacturers
• Foreign Trade Zones (free port)
a specially designated area customs port of entry that allows
resident companies to import materials and components
from foreign countries; assemble, process, manufacture, or
package them; and then ship the finished product while
either reducing or eliminating tariffs and duties.
Example: Hong Kong, Singapore, Colón (Panama),
Copenhagen, Stockholm, Gdańsk (Poland), Los Angeles,
and New York City.
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Business Incubators
an organization that combines low-cost, flexible rental space
with a multitude of support services for its small business
residents.
Example: Quang Trung Software City Incubator
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Layout and Design Considerations
• Layout: the logical
arrangement of the
physical facilities in a
business that
contributes to efficient
operations, increased
productivity, and
higher sales.
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Layout: Maximizing Revenues,
Increasing Efficiency, or
Reducing Costs
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Layout and Design Considerations
• Size and Adaptability
• Construction and Appearance
• Entrances Refer to
• Signs
Customer
• Building Interiors
• Drive-Through Windows
Segmentation
• Sight, Sound, Scent, and Lighting
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Which music to use
at peak time?
• Quaker State & Lube, a chain of 45
casual dining restaurants that feature
an automotive theme, hired experts at
Ambiance Radio to create playlists for
its outlets for different parts of the day
(lunch, dinner, and late night). At peak
times, Quaker State & Lube plays
upbeat, fast-tempo music to encourage
faster dining and to speed up the
number of table turns
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• When quieter music • When louder music
played, people were was on, they were
10% more likely to more likely to make
select healthy choices. less healthful ones.
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The impulse of buying - Music can affect our
behavior
• Shoppers were more likely
to purchase French wine
when French music was
played and more likely to
purchase German wine when
German music was played
Norman/Nguyen Vo Hien Chau
Layout for Manufacturers
• Type of product. Product design and quality standards, whether the product is
produced for inventory or for order, and the physical properties, such as the size of
materials and products, special handling requirements, susceptibility to damage,
and perishability.
• Type of production process. Technology used, types of materials handled, means
of providing a service, and processing requirements in terms of number of
operations involved and amount of interaction between departments and work
centers.
• Ergonomic considerations. Ensure worker safety, avoid injuries and accidents, and
increase productivity.
• Economic considerations. Volume of production; costs of materials, machines,
work stations, and labor; pattern and variability of demand; and minimizing cycle
time, the amount of time between receiving a customer’s order and delivering the
finished product.
• Space availability within the facility itself. Ensure that the space will adequately
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meet current and future manufacturing needs.
Homework 10:
• What factors should a seafood processing plant, a
beauty shop, and an exclusive jewelry store consider in
choosing a location? List factors for each type of
business
Norman/Nguyen Vo Hien Chau
