Essentials of Entrepreneurship and Small Business Management, 9e (Scarborough)
Chapter 14 Choosing the Right Location and Layout
1) The first phase of determining where to locate a business is ________.
A) choosing a state in which the business owner wants to live
B) determining which city has the demographics that best fit the business
C) conducting a specific site analysis
D) determining which regions of the country are experiencing growth
2) The location has far-reaching ramifications (such as high-tech companies) that need
________.
A) a highly-skilled work force
B) a high traffic site
C) easy access to shipping routes
D) a nearby retail district
3) Entrepreneurs using the Census Bureau’s Web site to evaluate potential locations have access
to which of the following information about the residents in those locations?
A) Income levels
B) Age distributions
C) Occupational data
D) All of the above
4) Which of the following information is available from U.S. Census data?
A) The value of the homes in an area
B) The number of rooms in the homes in an area
C) Number of vehicles owned
D) All of the above
5) Which of the following information is not available from Census data?
A) Education levels
B) Income levels
C) Expenditures on dining out
D) Occupational data
6) ________, published annually, matches population demographics with lifestyle interests.
A) The Lifestyle Market Analyst
B) The Commercial Atlas and Marketing Guide
C) The Zip Code Atlas and Market Planner
D) A Researcher’s Guide to the 1990 Census
7) ________ provides useful demographic information in eight areas.
A) Topological Integrated Geographic Encoding Referencing
B) The American Marketplace: Demographics and Spending Patterns
C) Zip Code Atlas and Market Planner
D) Sales and Marketing Management’s Survey of Buying Power
8) A Geographic Information System (GIS) ________.
A) is a software package combining the ability to draw detailed maps with the power to search
through databases
B) helps entrepreneurs discover important trends and characteristics in the population that
otherwise might go unnoticed
C) can be an incredibly powerful tool for determining the ideal location based on specific criteria
the entrepreneur establishes
D) All of the above
9) TIGER ________.
A) is a software package combining the ability to draw detailed maps with the power to search
through databases
B) breaks down the population, retail sales, etc., by census region
C) contains the names of every street in the country and detailed block statistics for 345 urban
areas
D) All of the above
10) When choosing a state in which to locate, one must evaluate which of the following?
A) The general business climate
B) The state’s business laws, regulations, and taxes
C) Tax incentives and/or investment credits
D) All of the above
11) Locating close to ________ is critical for manufacturers, service providers and other
companies that will be competitive.
A) markets they plan to serve
B) suppliers
C) transportation routes
D) airports and rail transportation
12) When the cost of transporting finished goods to market is high relative to their value, the key
location criterion is ________.
A) low rental or lease rates
B) proximity to raw materials
C) proximity to markets
D) zoning regulations
13) A glass manufacturer that requires an extremely pure, very fine sand in its production
process would be most concerned about the ________.
A) business climate
B) proximity to raw materials
C) demographic profile of the local market
D) local wage rates
14) When would a business choose to locate near the source of the raw material?
A) The company requires an important raw material that is difficult to transport.
B) The company requires an important raw material that is expensive to transport.
C) The company keeps its inventory of an important raw material low to keep costs down and
counts on quick deliveries from suppliers.
D) All of the above
15) When examining a state’s available labor force, the potential business owner needs to know
________.
A) the state’s labor relations history
B) the demographics of the target customers
C) both the number and education of the available workforce
D) the proximity to its customers
16) A labor force that has technical training would be most important to a ________.
A) clothing store
B) restaurant
C) skiing equipment specialty store
D) computer company
17) What is the state’s overall attitude toward your kind of business? Has it passed laws that
impose restrictions on the way a company can operate? Does the state offer small business
support programs of financial assistance to entrepreneurs? These questions help an entrepreneur
to assess the overall ________.
A) population trends
B) proximity to markets
C) labor supply
D) business climate
18) One direct way to lower annual operating costs is to locate in a state where ________.
A) there is an attractive business climate
B) the labor market is highly competitive
C) taxes and regulatory costs are lowest
D) the key markets are relatively accessible
19) The “Best and Worst States for Doing Business” indicates that California is one of the least
attractive states in which to do business based on these factors ________.
A) wage costs based on hourly and salaried compensation
B) tax costs and electricity costs
C) industrial and office rent costs
D) All the above
20) Which of the following characteristics for selecting a city would be of greatest interest to a
retail store selling fine china and collectibles?
A) Public services
B) Transportation
C) Zoning
D) Population characteristics
21) Geographic concentrations of interconnected companies, specialized suppliers, and service
providers that are present in a region are called ________.
A) zones
B) clusters
C) trading areas
D) variances
22) ________ is a system that divides a county or city into small cells or districts to control the
use of land, buildings, and sites.
A) An enterprise zone
B) Zoning
C) Apportioning
D) Redistricting
23) When Jan and Detmar Wolcinski bought their 152-year-old house, they began remodeling it
with one goal in mind — opening a bed and breakfast inn. The Chadwick Inn has exceeded the
Wolcinski’s expectations in its first year of operation, but now some neighbors are starting to
complain about the increased traffic in their neighborhood and the late hours some of the Inn’s
guests keep. The Wolcinski’s greatest challenge in the near future is most likely ________.
A) convincing the local historical preservation board that the modifications they made to the
house are in keeping with its historical character
B) zoning laws prohibiting commercial businesses in a residentially zoned area
C) major hotel chains opening competing “bed and breakfast” hotels on adjacent lots
D) encroaching shopping centers and malls that push up real estate prices
24) The purpose of zoning regulations is to ________.
A) restrict the growth of businesses
B) contain similar types of activities in suitable locations
C) help new businesses “incubate” in their startup period
D) build the traffic volume for retail and service businesses
25) Job training for workers and reduced tax rates, financial grants and loans, are examples of
what some ________ offer as business ________ to locate in their jurisdictions.
A) states; motivators
B) cities; incentives
C) regions; perks
D) counties; attractions
26) A(n) ________ is a special exemption to a zoning ordinance.
A) variance
B) exception
C) trade area
D) cluster
27) A location in a city offering a high quality of life can be attractive to the entrepreneur and
may make ________ easier.
A) financing
B) recruiting employees
C) resolving zoning issues
D) access to a trading area
28) The key to finding a suitable location is identifying the characteristics that can give a
company a competitive edge and then searching out potential sites that meet those criteria.
29) By collecting a wealth of data on possible locations, entrepreneurs will find that the location
decision is made for them.
30) The first level of the location decision is the selection of a particular region of the country.
31) The first phase in selecting a location is determining what regions of the country are
experiencing substantial growth.
32) When conducting a regional evaluation, one of the first places an entrepreneur should turn
for information is the U.S. Census Bureau.
33) The Lifestyle Market Analyst matches population demographics with age.
34) The Zip Code Atlas and Market Planner provides detailed information on sales, spendable
income, etc., by census region, county, and city.
35) Geographic Information Systems (GIS) are powerful software programs that allow
entrepreneurs to pinpoint the ideal location for their businesses.
36) The U.S. Census department’s “TIGER” file is a computerized map of the entire United
States that gives entrepreneurs the power to pinpoint existing and potential customers.
37) By studying the demographics of a proposed location, a small business owner can determine
how well it matches the market for the owner’s product or service.
38) When the cost of transporting a product is high relative to its value, locating close to the
market a manufacturer plans to serve is critical.
39) Proximity to needed raw materials is critically important for a service firm.
40) When analyzing the labor supply, a small business is concerned only with the level of
education and training of the labor force in the area.
41) When choosing a location, a small business owner should match the characteristics of the
labor force her/his company requires with the characteristics of an area’s available labor pool.
42) Knowing the type of labor a business needs and preparing job descriptions and job
specifications in advance will help a business owner determine whether or not there is a good
match with the available labor pool.
43) The most important factor when evaluating the labor supply in an area is its prevailing wage
rate.
44) The “friendliness” of the overall business environment is an important consideration in
location selection and information is available to offer objective insight for this assessment.
45) The choice of the location for a Tiffany & Company should be determined by the
compatibility with the community it will serve.
46) Zoning is a system for mixing types of business and industrial activities to make maximum
efficient use of the area.
47) Zoning is a system that divides a city or country into small cells or districts to control the use
of land, buildings, and sites.
48) A variance is a special exemption to a zoning ordinance.
49) For many entrepreneurs, quality of life is one of the key determinants of their choice of
locale.
50) A location that has housed several businesses that have failed within the past few years is
likely to have a bad reputation and a negative image.
51) Discuss the various sources of information available to the small business owner for deciding
in which region of the country to locate her/his business.
52) Identify and explain five of the eight criteria a small business owner should consider when
selecting the state in which to locate her/his business.
53) Identify and briefly discuss the eight factors an entrepreneur should consider when selecting
the city in which to locate her business.
Mini-Case 14-2: “It’s a Great Location for a Bar”
Fred Stanford has just completed bartenders’ school in Los Angeles and is ready to build a life
for himself. Sunday’s paper has an ad in the business opportunities section for a bar in Mesa
Verde, Colorado. Fred has heard that the West is a high growth area and the quality of life in
Colorado is very good. Fred’s best friend, Carl, begins to ask Fred some questions about his new
idea. “To begin with, Fred, where is Mesa Verde, Colorado?”
Fred decides to call the telephone number in the ad and is put in touch with Ansel King, a
business broker located in Pueblo, Colorado. When asked where in Colorado Mesa Verde was,
Ansel was prompt to point out that it was only 35 miles from Pueblo on the Interstate and has a
population of nearly ten thousand. “Fred, this town is a great location for a bar, and I have just
the kind of deal for a young man like you looking to get started.”
54) What city-related factors does Fred need to consider when evaluating this community as a
location for a bar?
55) What publications could Fred use to investigate whether or not this is a good region for this
bar?
56) The region from which a business can expect to draw its customers over a reasonable time
span is called its ________.
A) enterprise zone
B) zoning area
C) trading area
D) retail draw
57) The primary variable(s) that influence(s) the scope of a trading area is/are the ________.
A) character of the transportation network
B) nature of competing businesses
C) type and size of the business operation
D) racial and political barriers in the local community
58) Nature’s Way, a health food store, has just opened in a popular neighborhood shopping
center next to Silver’s Gym, a physical fitness center catering to both men and women. Nature‘s
Way is relying on which location principle?
A) Trade area
B) Retail consistency
C) Retail compatibility
D) Zoning
59) The index of retail saturation ________.
A) is retail expenditures times retail facilities divided by the number of customers
B) is the ratio of a trading area’s sales potential to its sales capacity
C) evaluates both the number of customers and the intensity of competition in a trading area
D) B and C above
Refer to the following information to answer the following questions.
An entrepreneur considering two sites for a men and boys shop determines that (s)he needs sales
of $158 per square foot to be profitable. Site #1 has 13,500 potential customers who spend an
average of $160.20 per year on men and boys wear. Two competitors occupy 14,200 square feet
of space. Site #2 has 10,800 potential customers who spend an average of $152.10 per year on
men and boys wear. One competitor has 10,000 square feet.
60) The index of retail saturation for site #1 is $________.
A) 150.21
B) 168.51
C) 152.30
D) 166.19
61) The index of retail saturation for site #2 is $________.
A) 164.27
B) 140.83
C) 170.64
D) 146.30
62) Based on the above calculations, what is the entrepreneur’s best option?
A) (S)he should choose site #1.
B) (S)he should choose site #2.
C) Neither site meets minimum criteria of $158 per square foot.
D) Either site will work well since both meet minimum criteria of $158 per square foot.