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Chapter 16 Team Questions
CHAPTER 16 QUESTIONS [Answer Colors: Kim: Black; Renee:
1. What factors should a manager consider when evaluating a region in which to locate a business?
One of the most important decisions a manager can make is where to locate his/her business to “maximize the likelihood of success.” This decision can be the difference between success and failure. Business owners should “always keep in mind that a business must locate where its customers are, unless the company is a destination retailer.” You can have a “competitive edge” if you locate in the right place. You are not playing darts or closing your eyes and stabbing a map with a push pin. This decision takes research and study of many factors. If you locate in an obscure place where no one, including your customers, can see you or get to you with relative ease, all the effort and money you have invested could be lost. (Scarborough, 2008, p. 499)
Studying the characteristics of a city’s residents, including population sizes and density, growth trends, family size, age breakdowns, education, income levels, job categories, gender, religion, race, and nationality gives entrepreneurs the facts they need to make an informed location decision. A company’s location should match the market for its products or services, and assembling a demographic profile will tell an entrepreneur how well a particular site measures up to his or her target market’s profile.
Where are such data available?
Through basic census data, entrepreneurs can determine the value of the homes in an area, how many rooms they contain, how many bedrooms they contain, what percentage of the population own their homes, and the amount residents’ monthly rental or mortgage payments are. The Economic Census is a useful tool for helping entrepreneurs determine whether the areas they are considering as a location are already saturated with competitors. One chain of food stores uses data from the Economic Census to estimate its market share in the trading area for each of its existing stores and to forecast sales in potential locations before opening new ones.
Managers start their search for the prime location of their business with the Region of the country, the State, and the City, down to the exact Street address to answer the following: “Which region of the country has the characteristics necessary for your business to succeed?” In the early stages of research, some of the broad areas to consider are: regionally, is the area experiencing substantial growth, what is the total population and how fast or slow it is growing, and the what are approximate income ranges of the population. Once these broad factors have been settled, then you look to the State to “explore laws, regulations, and taxes that govern businesses and any incentives or investment credits the state may offer to businesses locating there.” This information is usually available from the State Chamber of Commerce department. Other things to consider are how available is your proposed location of “markets, raw materials, wage rates, quantity and quality of the labor supply, general business climate, and tax rates.” (Scarborough, 2008, p. 504-5) Selecting the City for your company is more “hands-on” as managers/owners should “investigate close up and in person” every location proposed. Do not rely on a one time visit to a location to pick your location. You should visit your prospective location on “several occasions at different times of the day and night.” Visit with the neighboring businesses and get to know the people who surround your business. “Once you’ve signed the lease, it’s too late to find out that a local biker gang known as ‘Nobody’s Angels’ uses the vacant building next door as an after-hours gathering place.” Stay vigilant on this task by gathering as much data as possible and then reviewing it with a fine tooth comb to pick the exact location for your business to be successful. (Scarborough, 2008, p. 508)
2. Outline the factors entrepreneurs should consider when selecting a state in which to locate a business.
The key factors entrepreneurs should consider when selecting a state should be: Laws, regulations and taxes that govern businesses, any incentives or investment credits the state may offer, proximity to markets, proximity to raw materials, wage rates, quantity and quality of the labor supply, general business climate, and tax rates. -
3. What types of information can an entrepreneur collect from census data?
The information an entrepreneur can collect from census data is truly amazing and it is free. An entrepreneur can obtain demographic and economic information about residents of a particular area (state, county, town) that includes age, gender, ancestry, marital status, language spoken, education level, occupation, travel time to work, income level, and other population characteristics, housing information, such as number of rooms, age of home, utility costs, the home's value, number of cars owned and other characteristics. An entrepreneur can also retrieve data from the Economic census that would identify competitors and potential customers, it includes data regarding number of establishments in an industry, their sales, shipments, number of employees and annual payroll. The American Community Survey includes information on how rapidly an area is growing and how quickly its population makeup is changing. -
4. Explain the statement: “The portions of a small store’s interior space are not of equal value in generating sales revenue.” What areas are most valuable?
There are certain areas of a small store's interior space generate more revenue that others. Space values decrease as distance from the main entry-level floor increases. Main level areas contribute to a greater portion than those on other floors. Main level areas close to the front of the store are the high value areas.
Scarborough, N. M., Wilson, D. L., & Zimmerer, T. W. (2008).
Effective Small Business ManagementL An Entrepreneurial Approach
(S. Yagan, Ed., 9th). Saddle River, NJ: Prentice Hall.
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