Chapter 9—The Location Plan
TRUE/FALSE
1. A brick-and-mortar store is actually a general term that refers a retail outlet dealing in building
supplies.
2. For many entrepreneurs, choosing a location for a small business is a one-time decision—made only
when the business is first established or purchased.
3. While one of the five key factors in determining a good business location may be more important in a
given situation, each factor will always have some influence.
4. If the cost of shipping the finished product is high, the factory should probably be located near a
source of raw materials.
5. Customer accessibility is vital in industries in which the cost of shipping the final product is high
relative to the product’s value.
6. All other factors being equal, retail and services businesses will find little advantage in selecting a
location near the center of the market.
7. The primary factor in determining the location for a sawmill would probably be proximity to the
market.
8. Many entrepreneurs recognize the value of talking to local realtors to determine site availability and
appropriateness.
9. Sometimes an attorney can insert special clauses into a lease agreement that will allow the lessee to
exit the agreement under certain circumstances.
10. Manufacturing equipment can be categorized as general-purpose and special-purpose.
11. Bottling machines and auto assembly line machinery are examples of general-purpose equipment.
12. Purchasing used equipment is acceptable as long its use does not send the wrong message to a
customer.
13. To maximize sales and profits, a discount shoe store should create an atmosphere similar to higher
price point shoe stores as the customers will expect the same atmosphere.
14. A business based in the owner’s home must conform to local zoning ordinances.
15. A home location is still almost always considered a temporary situation until the business grows.
16. E-commerce can provide a benefit to small firms by compressing the sales cycle and easing cash flow
difficulties.
17. The Internet has impacted small firms using an e-commerce business model by bringing new
technology to the management of customer service.
18. Because B2B success stories generally receive more publicity than B2C ventures, the potential for
B2C opportunities are overlooked.
19. B2C startups offer one main advantage over brick-and-mortar retailing—transaction speed.
20. One advantage B2C businesses have over traditional retailers is that they can quickly change product
mixes and prices, as well as the appearance of the online store.
21. It is possible for an entrepreneur to do business over the Internet without either a website or storefront.
22. A person who is selling product on eBay is using a B2C model.
23. A content-based website provides only the history of an organization along with a physical address and
phone numbers.
24. The role of a website can range from merely offering content and information to enabling complex
business transactions.
25. The transaction based model is the least complex type of website
26. Blogs and podcasts are among the emerging options for an online presence.
27. Many entrepreneurs start their online businesses as a part-time venture.
28. Online businesses that begin as a part-time venture enjoy a lower risk of failure.
MULTIPLE CHOICE
1. Allison plans to open a boutique, a trendy retail shop. She will rely heavily on walk-in customers to
support her business. Allison will need:
a.
a point-and-click facility.
b.
a bricks-and-clicks facility.
c.
a brick-and-mortar facility.
d.
a professionally developed Website.
2. Arthur’s business needs a physical building. Arthur’s most important decision will be:
a.
where to locate.
b.
how much to spend.
c.
whether to rent or own.
d.
whether to build or purchase an existing structure.
3. Which statement is true about location decisions?
a.
Franchisers assist entrepreneurs with location decisions.
b.
Location decisions have an temporary effect on business operations.
c.
Location decisions should be made independently of consumer needs.
d.
The location decision is equally critical to all types of businesses.
4. Bettina has found a relatively inexpensive building that is a converted service station. Before she
signs the lease, she should ask:
a.
How is the location zoned?
b.
What happened to previous businesses at that location?
c.
What are the real estate taxes on the property?
d.
Is street parking allowed?
5. Bart is ready to look for a site for his new business. To help him in his search he should:
a.
contact a local real estate agent.
b.
check property for sale ads in the local newspaper.
c.
check into site selection software.
d.
check with the local small business development office.
6. For small service or retail businesses, the top priority in location decisions is
a.
personal preference.
b.
resource availability.
c.
customer accessibility.
d.
environmental conditions.
7. Site-related factors that should be taken into consideration when selecting a retail location include
a.
future advertising costs.
b.
the labor supply.
c.
raw material availability.
d.
customer accessibility.
8. Customer accessibility is the most critical factor in evaluating a specific site for a
a.
clothing manufacturer.
b.
drugstore.
c.
plumber.
d.
software development company.
9. Callista can locate her business in any state regardless of its weather because she sells:
a.
air conditioners.
b.
outdoor swimming pools.
c.
consumer yard irrigation systems.
d.
mattresses.
10. Roger is analyzing regional differences in seeking a location for a new firm and is looking at states
with favorable tax laws. Based on this information, he should look at which stated?
a.
Wyoming
b.
Massachusetts
c.
Ohio
d.
New York
11. Which statement is true concerning business environment conditions for a new business?
a.
State governments will help new business by levying taxes.
b.
Determining the zoning is important as it may limit a company’s operations.
c.
Many states offer location incentives to attract jobs to very stable areas.
d.
Finding an area that has a low cost of living means a low standard of living for employees.
12. Zoning ordinances
a.
may limit what type of business can be located on the property.
b.
will prevent commercial signs.
c.
typically will allow parking of customers but not employees.
d.
All of the above statements are true about zoning ordinances.
13. Basic considerations that enter into the selection of a location for a manufacturing business normally
include
a.
availability of raw materials.
b.
customer accessibility.
c.
neighborhood conditions.
d.
federal income taxes.
14. A good reason for relocating a typical manufacturing business is to
a.
stabilize income taxes.
b.
increase customer traffic.
c.
be closer to raw materials.
d.
provide free-flow space.
15. Calvert is contemplating building an aluminum smelting plant. The ratio of bauxite, the raw material
from which aluminum is extracted, to aluminum is two to one. It takes two tons of bauxite to produce
one ton of usable aluminum. Where should Calvert locate his smelting plant?
a.
Close to his customers
b.
Close to the bauxite mine
c.
Close to transportation
d.
Close to an area with a suitable labor supply
16. Daisy is planning a clothing manufacturing company. When selecting the location for her production
facility, Daisy will want to consider:
a.
ease of access to her customers.
b.
ease of access to transportation.
c.
availability of suitable labor.
d.
ease of access to raw materials.
17. Why are gas stations frequently located at the interchanges of interstate highways?
a.
The site provides easy access to raw materials
b.
The site is easy to find at night.
c.
The site provides tax incentives because many are in rural areas.
d.
The site provides easy access to both customers and transportation.
18. An advantage for choosing a hometown as a location for a new business venture include the fact that
a.
the entrepreneur knows the landmarks around his or her home community.
b.
credit can be established more easily.
c.
friends and relatives line up new customers.
d.
the reduced risk.
19. Dallas is considering starting his business in his hometown, hoping that:
a.
he can get a more favorable tax treatment.
b.
he does not have problems with zoning laws.
c.
his friends and family will use his service and encourage others to follow suit.
d.
his short commute will help reduce costs.
20. Facilities that rent shared space, services and management only to new businesses are called
a.
industrial parks.
b.
community development centers.
c.
shopping centers.
d.
business incubators.
21. For many new firms, the most important reason to lease rather than buy a facility is
a.
avoidance of a large cash outlay.
b.
freedom in modifying the building.
c.
avoidance of interest payments.
d.
avoidance of liability lawsuits.
22. An important advantage an entrepreneur gains by leasing rather than buying a facility is
a.
receipt of an investment tax credit.
b.
a decrease in investment risk.
c.
a decrease in the amount of promotion required.
d.
a customized layout.
23. Emma is looking for a building for her homestyle cooking restaurant. A major consideration would
be:
a.
the building should have a welcoming exterior.
b.
the building should be on one level.
c.
the building should accommodate the growth she anticipates in the next five years.
d.
the building should be located in a shopping mall.
24. According to the National Federation of Independent Business, what is the main reason entrepreneurs
buy equipment as opposed to leasing?
a.
Can treat the asset as they wish
b.
Don’t have to return it
c.
Less expense
d.
Puts the asset on the books
25. Harry is starting a business where he restores homes built before 1900 and is purchasing used
equipment, specifically lathes, planing mills, and drill presses. This equipment is would be an example
of what type?
a.
Special-purpose
b.
Product-layout
c.
General-purpose
d.
Automated
26. An example of special-purpose equipment for a carbonated beverage company is a
a.
refrigerator that keeps the product at the appropriate temperature.
b.
bottling machine that adjusts pressure for different flavors.
c.
an assembly line moving the beverages to the loading dock.
d.
mixer that combines the ingredients in the proper order.
27. Using special-purpose equipment in the manufacturing process can result in
a.
increased operator errors.
b.
higher costs of processing.
c.
a rise in accident rates.
d.
greater output per machine-hour of operation.
28. Helen is planning to open a high-fashion clothing store for young professional women. Which
descriptor is the most important consideration for the fixtures?
a.
Economical
b.
Elegant
c.
Feminine
d.
Practical
29. Eaton is writing the location plan for his business plan. He should be sure to include his requirements
for office equipment because:
a.
this is the largest expense he will have for his start-up.
b.
he does not plan to work from home.
c.
it is important to present the proper image to his clients.
d.
the cost for this equipment needs to be included in his financial plan.
30. Genevieve just completed law school and is ready to open her law office. The image her office
should convey is:
a.
trendy, minimalist, futuristic with bold colors and modern art.
b.
old-fashioned, dark, somber with dark colors and heavy furniture.
c.
solid, trustworthy, confident with neutral colors and comfortable furniture.
d.
light-hearted and whimsical with pastel colors and playful art.
31. Businesses that operate in the home
a.
can increase profits by decreasing costs.
b.
require customer traffic.
c.
are called family businesses.
d.
are less common today than they were 10 years ago.
32. Fletcher has pre-school children. He might choose to work from home:
a.
so he can have more quiet time.
b.
so he can spend more time with his family.
c.
because he shies away from contact with outsiders.
d.
because he has read horror stories about daycare centers.
33. Juanita is considering locating her a consulting business in her home. Which consideration is the
greatest challenge?
a.
The increased time needed to get the business running
b.
Her business image may not be perceived as highly as a brick and mortar business
c.
The higher cost she may face for equipment and technology
d.
The decreased time she will have with friend
34. Annie is starting her photography business and is locating it in her family home. Which aspect is
critical in the balance between her business and her family?
a.
Making sure family members don’t spoil the image of the business when clients arrive
b.
Having a professional studio area that is separate from the family area
c.
Shielding her family from the business taking over the home
d.
All of the above statements are true.
35. Rod is locating his architecture business at his home in a suburban area. Which professional should he
contact first before starting?
a.
The city’s planning and zoning board to make sure he can have a business in the home
b.
His CPA to determine if he can claim a tax deduction for the business
c.
His insurance agent to increase the policy for coverage on the equipment and business
activities on site
d.
All of the professionals are equally important and should be contacted before he starts the
business.