Small Business Management 17e - Cengage

Small Business Management 17e - Cengage

1. Describe the five key factors in locating a brick-and-mortar startup. 2. Discuss the challenges of designing and equipping a physical facility. 3. Recognize both the attraction and the challenges of creating a home-based startup. 4. Understand the potential benefits of locating a startup on the Internet. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 92 Locating the Brick-and-Mortar Startup Brick-and-Mortar Store The traditional physical store from which businesses have historically operated.

The Importance of the Location Decision High cost of constructing a physical location. Effect of poor location on eventual success of the firm. Type of business affects the importance of business location to customers. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 93 Location Options for the Startup 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 94

9.1 Five Key Factors in Determining a Good Business Location 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 95 Other Factors in Selecting a Location Neighbor Mix Whos next door? Security and Safety How safe is the neighborhood?

Services Past Tenants Fate What happened to them? The Life-cycle Stage of the Area Is the site in the embryonic, mature, or declining stage? Is there municipal trash pickup? 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 96

Selecting a Good Location Customer Accessibility Customer convenience (high traffic) Access by targeted customers (niche market) Avoidance of shipping costs (local markets) Business Environment Conditions Climate-related factors Business environment factors Presence of established competitors Regulations, legal requirements and zoning restrictions Tax structure, exemptions, and enterprise zone incentives Cost of living for employees 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

97 Selecting a Good Location (contd) Availability of Resources Nearness to raw materials Availability of a suitable labor supply Access to adequate and reliable transportation Personal Preference of the Entrepreneur Familiarity with home community environment Support of entrepreneur by the community Desire for a particular lifestyle Contribution to the community 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 98

Key Factors in Selecting a Location Site Availability and Costs Difficulty of locating a good site Business incubator: shared space, services, and management assistance for new businesses Buying: large costs for and commitment required to purchase site outright. Advantages of leasing: Avoids a large cash outlay. Allows the owners to postpone committing to the site before the business becomes a success. More affordable in high-image areas Retains focus on running business

2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 99 Designing and Equipping the Physical Facilities Design Requirement Challenges Physical facilities should be of adequate size and accommodation; not too large or too luxurious. Considerations: Age/condition of building Fire hazards Heating/air conditioning Entrances and exits Lighting and restroom facilities

The ideal building meets the functional requirements of the business and projects the appropriate image to customers and the public at large. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 910 9.2 Small Business Owners Choose Buying over Leasing 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 911

Equipping the Physical Facilities Manufacturing Equipment General purpose equipment Serves many functions in the production system Low purchase cost Flexible production Good resale value Special-purpose equipment Are designed to serve specialized functions in the production process Low labor cost High hourly output

Limited resale value 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 912 Retail Store and Office Equipment Retail Display racks Sales counters Cash registers/ POS systems Business Image Office Equipment Computers

Fax machines Copiers and printers Telephone systems Filing cabinets Luxury/utilitarian customer furnishings Lighting Displays Signage 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 913 Locating the Startup in the Entrepreneurs Home Home-Based Business

A business that maintains its primary facility in the residence of its owner Attraction of a Home-Based Business Low start-up and overhead costs Convenience for family and lifestyle Technology Advances in office equipment and connectivity allow home-based business to compete with commercial sites. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 914

Common Reasons for Starting a Home-Based Business 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 915 The Challenges of Home-Based Business Image Businesses A professional business image is difficult to maintain in a home environment. Legal Considerations Local laws and zoning ordinances prohibit many types of home-based businesses.

Family and Business Conflicts The need to observe regular business hours and establish spatial boundaries (specific work areas) to avoid distractions. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 916 Locating the Startup on the Internet E-Commerce Electronic commerce, or the buying or selling of products or services over the Internet. Benefits of E-Commerce to Startups Allows competition with larger firms in larger markets.

Helps with cash flow problems by compressing the sales cycle. Builds better customer relationships through better service. Electronic Customer Relationship Marketing (eCRM) 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 917 Factors Affecting the E-Commerce Choice Technical Limitations

Website development and maintenance costs Insufficient bandwidth Upgrading software Integration of e-commerce with brick-and-mortar operations Customer access to the Internet and connectivity limitations Non-Technical Limitations

Privacy of customer transactions Customer information security Inability of customers to touch or try on products 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 918 E-Commerce Business Models Business Model A group of shared characteristics, behaviors, and goals that a firm follows in a particular business

situation. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 919 9.3 Basic E-Commerce Business Models 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 920 Types of Customers Served Business-to-Business (B2B) Model Sells to business customers electronically.

Facilitates and work outsourcing Business-to-Consumer (B2C) Model Electronic retailing to final customers; resulting in disintermediation (bypassing middlemen). Advantages of 24/7 E-Tailing: Flexibility: All-hours user access to products and services Immediate completion of transactions Disadvantages Integration costs to associate with larger online retailers Payment security risks Lack of direct access to consumers 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

921 Types of Customers Served Consumer-to-Consumer (C2C) Model Auction Sites Web-based businesses offering participants the ability to list products for bidding. Advantages Ease and low costs for online store setup Access to large customer markets Disadvantages Listing fees and commissions paid to auction site

Direct competition from other sellers 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 922 9.4 Selling Your Item on eBay Step 1: Set up an eBay sellers account, which is free of charge. Step 2: Create a listing for the item to be offered for sale. Step 3: Manage your listing to see if anyone has bid on or purchased your item. Step 4: Wrap up with the sale with your buyer by receiving payment, shipping the item, and leaving feedback. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted

in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 923 Nature of Online Presence Content-Based Model The website charges an access fee for information but does not trade in products and services. Information-Based Model The website provides free information about a business, its products, and other matters. Transaction-Based Model The website provides a mechanism for buying or selling products or services.

Emerging Models: Blogs, audio/video podcasts, YouTube ads, and social interest bookmarking sites (Pinterest) 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 924 Internet-Based Businesses and the Part-Time Startup Advantage Advantages of Part-Time Startup Income keeps flowing, not interrupted if venture fails Flexibility and lower costs of launching startup Reduces risk of transition to entrepreneurial life Disadvantages of Part-Time Startup Need to find suitable location for growing venture.

Involvement with startup conflicts with personal life Risk of failure of startup after leaving present job 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 925 Key Terms auction sites brick-and-mortar facility business incubator business-to-business (B2B) model business-to-consumer (B2C) model consumer-to-consumer (C2C) model content-based model

disintermediation e-commerce Electronic Customer Relationship Marketing (eCRM) general-purpose equipment home-based business information-based model special-purpose equipment transaction-based model zoning ordinances 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 926

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