Chapter Outline

LO 12.1  Describe small business distribution and explain how “efficiencies” affect channels of distribution.

The purpose of a channel of distribution is to get a product from a producer to consumers as quickly and cheaply as possible. Because distribution represents such a large portion of the price of many products, selecting the most efficient channel will help keep costs down.

LO 12.2   Explain how the location of your business can provide a competitive advantage.

Competitive advantages can be built on many factors. If the location choice of your business makes your product, good, or service more accessible to your customers, to the point where they buy from you rather than other sources, then location is your competitive advantage.

In deciding where to locate your business, you should consider the price and availability of land and water, the labor pool from which you can hire employees, accessibility to customers and suppliers, closeness of competition, adequacy of transportation, public attitudes toward new businesses, taxes and regulations, your personal preference about where you want to live, financial incentives offered, and the quality of life available.

LO 12.3   Discuss the central issues in choosing a particular site within a city.

The most appropriate site for your business is determined by answering specific questions related to matching the needs of your business with the type of site, accessibility, legal considerations, and economic factors.

LO 12.4  Compare the three basic types of locations.

The three types of locations you may choose are central business districts (CBDs), shopping centers, and stand-alone locations. The CBD for most cities and towns includes the original “downtown” area, so it is usually the oldest urban section. Shopping centers can range from small strip malls that serve the local neighborhood to very large regional malls that draw customers from hundreds of miles. A stand-alone location places your business apart from other businesses.

LO 12.5  Explain the types of layout you can choose.

For retail businesses, a free-flow layout encourages customers to wander and browse through the store. A grid layout moves customers up and down rows of shelves and fixtures. A loop layout features a wide central aisle that leads customers quickly from one department to another. For manufacturing businesses, a process layout groups all similar equipment and jobs together and provides the flexibility needed by many small manufacturers. A product layout arranges equipment and workers in a specific sequence to produce products in a continuous flow. With a fixed layout, the product being made stays in one place, while equipment, materials, and labor are brought to it.

LO 12.6   Present the circumstances under which leasing, buying, or building is an appropriate choice.

When deciding whether to lease, buy, or construct a building, you need to consider how long the building will be suitable for your business and whether you can afford to tie up your capital, which could be used for other purposes. Before leasing, you need to carefully examine the terms and conditions of the lease before signing it.