Business location is considered to be a very crucial and important decision to make. The decision depends on the nature/ type of the business, the availability of the equipment and resources that are required for the business to operate and lastly the customers. The business must need to know their target customers and must identify where they are situated/ located.
Since competition is will influence organizational policies, the 4Ps of marketing can be a great help. Along with price and product, place is an extremely important factor is business successes. Place can determine price. Factors like who the final consumer will be and what he or she looks for must be considered. Distance is also considered to be an issue that determines choice. No customer would like the idea of going beyond his/her convenience to buy something. Even if were to buy a pen or a notebook, no one ever think of taking a public transport, or driving their car to a place that is four or five blocks away. Nor will that person think of walking or cycling that far just to buy a pen. Therefore, the location of the business is important.
For business houses, distance determines operational efficiency, and reduced transportation costs. It is imperative that organizations in the service industry have their businesses in locations that are easily accessible to customers. Having a prominent location can reduce operational costs to such an extent that a part of the profit can be passed on to customers. The farther the business, the higher will be the price escalation. Time is also an added advantage when choosing a prominent location. For a customer, time and money are his or her prime concerns, and if that restaurant or retail shop is in a place that is convenient for customers to approach, they can overcome the additional time and money spent on travel. Similarly, for organizations, the geographical location of their establishment plays a vital role when they consider supply chain. A professional business chain will not compromise on their quality of service, which means that they will ensure that their supplies are adequately addressed to counter shortfalls. If a guest was to order a product from the menu, and the raw materials to prepare that food is in shortage, it could cause inconvenience and a bad name for the restaurant. Supply chains connect an organization’s suppliers, stores, sales, and dispatch. Therefore, for a restaurant that orders certain materials from the vendors, they would rather have their business in close proximity to them so that they can receive the product early. Thus, the advantage of having a business located in a place that is easily accessible has its advantages.
Taking an example of a manufacturing company, the company requires a specific distributional channel for selling the products and, therefore, the geographic location would be heavily focused by the company (Toyota one of the largest manufacturer of automobiles focus on the external market analysis for their location decision). For a business that is more information and service related, the business is not concerned with the location but is more concerned with whether the facility will meet the requirements and need of the company (for example Samsung Electronics).
Having understood how important it is for businesses to have their location prioritized, there are a few points that business heads need to know when choosing a location. First of all, managers need to conduct a demographic survey, which includes assessing traffic patterns, customer’s lifestyle, competition, and so on. Michael Rodelle, the director of a real estate business recommended to Papa Gino’s Inc. /D’Angelo Sandwich Shops franchise to “get a demographic overview of the area that targets their customers based on their age, income, households, and so on.” What’s more, another important element that managers should consider is the traffic density contributed by the establishment of coffee shops, supermarket, schools, and hospitals and so on. Finally, research whether the business will be conveniently placed for customers to access. Having the business near bus stops or subway stations will be ideal (Walmart is the best example for an organization that provides convenience to its customers).
The company can also avail the advantage by opening their business near to the competitor as the customers are known about the place and the promotional activities required would be minimal. The company can also be able to attract more and more customers by concentrating on the quality of the product. Firstly the new customers who visit the place for a quality and taste check and also the customers of the competitor (Mc Donald’s, KFC, Subway etc.).
Greg Kahn, the founder and CEO of Kahn Research Group in Huntersville, Carolina, says that the best place for any business is to be as close to their largest competitor as possible, as their marketing efforts could benefit them as well. However, such a strategy could misfire as well. In the belief that being close to one’s competitor can increase awareness, there is also a strong possibility that they could rob them of their customers. Therefore, when looking to do business close to their competitor, they must ensure that they have been maintaining an outstanding performance in comparison to their competitor(s).
Finally, when settling for an ideal place, it is important to negotiate the lease favorably. Consult a lawyer who can provide guidance in understanding how a lease agreement should be negotiated, and how much of premise modification or alteration is possible. Consulting a local real estate professional is a great idea. The local real estate professional would know his or her city inside-out, and understand what is required. Also, colleagues and friends can be contacted for referrals.
It must be noted that the decisions made by the new businesses are more likely to be corrected in the later part of the business life, but the poor choice of identifying the location is impossible to be corrected.