Business Location Decision for a Grocery Store

Choosing the right location for a grocery store is one of the most critical decisions that can
determine the success or failure of the business. The location impacts customer accessibility,
operational costs, competition, and overall profitability. When opening a grocery store in a
community, a comprehensive and thoughtful analysis must be conducted to select the optimal
site. This essay explores key factors and considerations involved in making a strategic location
decision.

Studying Customer Demographics and Traffic Flow

Understanding the characteristics of the local population is essential. This includes age groups,
income levels, household sizes, shopping habits, and preferences. For a grocery store, it is
important to target areas where the demographics align with the store’s product offerings and
pricing. For example, a store focusing on affordable staples would thrive in middle-income
neighborhoods, whereas a store selling organic or specialty foods might target higher-income or
health-conscious consumers.

In addition to demographics, analyzing the flow of pedestrian and vehicular traffic helps identify
spots with high visibility and accessibility. Locations near busy intersections, transit stops, or
community centers often generate steady foot traffic, increasing the chance of spontaneous visits.
Mapping peak traffic times also helps in planning operating hours and staffing.

Proximity to Suppliers and Competitors

The location should balance proximity to suppliers and competition. Being close to suppliers
reduces transportation costs and ensures fresher inventory, especially for perishables like fruits
and vegetables. Local supplier relationships can also lead to better prices and priority delivery.

At the same time, understanding the competitive landscape is vital. Opening too close to well-
established grocery stores might saturate the market, reducing potential customers and profit
margins. However, a location near competitors can also signal a thriving commercial area, so
careful assessment is needed. A location that offers convenience or differentiates through
product variety can still succeed even near competitors.

Evaluating Accessibility, Parking, and Visibility

Customer convenience is paramount. The site should be easily accessible by foot, car, and public
transportation. Good road connections and clear signage attract more customers. Availability of
sufficient parking spaces is especially important in suburban or semi-urban areas where most
customers rely on vehicles.

Visibility from main roads or popular pedestrian routes enhances brand awareness and draws
attention to the store. A well-positioned storefront, with good lighting and attractive displays, can
significantly increase walk-in customers.

Checking Rental or Purchase Cost of Premises

Cost considerations play a major role. A location with high rent or purchase prices may strain the
store’s finances, especially in the early stages. Budgeting for rent, taxes, utilities, and
maintenance is essential to ensure the location is financially viable.
Sometimes, a slightly less prime location with affordable rent and growth potential can
outperform expensive sites in the long term. Negotiations with landlords or local authorities
might also secure favorable terms or incentives.

Considering Infrastructure and Safety

Reliable infrastructure supports smooth business operations. Availability of utilities like water,
electricity, internet, and waste disposal must be ensured. Inconsistent power or water supply can
disrupt services and damage perishable goods.

Safety and security of the location affect both customers and staff. A well-lit, secure
neighborhood encourages visits and reduces theft or vandalism risks. Proximity to police stations
or security patrols adds reassurance.

Prioritizing High Customer Accessibility

Among all factors, high customer accessibility often ranks highest in importance. Even if a
location is affordable and safe, if customers find it hard to reach, the business may struggle.
Accessibility drives foot traffic and repeat visits, which are critical for grocery stores that rely on
frequent, smaller purchases.

Designing store hours and entrance points to align with customer habits maximizes this
advantage. For example, proximity to schools or workplaces can increase business during
specific times.

Balancing Competitive Landscape and Affordability

Avoiding oversaturation is crucial to maintain profitability. Conducting market research to

identify underserved areas or niches can reveal lucrative locations. Affordability also ensures the
business can invest in quality products, marketing, and staff, rather than just covering high fixed
costs.

In conclusion, selecting the best location for a grocery store requires a balanced approach that
combines market analysis, operational logistics, financial planning, and community
considerations. By carefully studying demographics, traffic, supplier and competitor proximity,
accessibility, costs, infrastructure, and safety, an entrepreneur can make an informed decision
that sets the foundation for a thriving business.

Industry Assessment: Moha Soft Drink Factory in Dessie

Moha Soft Drinks Industry S.C. – Dessie Plant Overview

Location: Dessie, Southern Wollo Zone, Amhara Region, Ethiopia

Established: 1993
Parent Company: Moha Soft Drinks Industry S.C.
Ownership: Part of the MIDROC Ethiopia Group

Company Background

The Dessie Plant is one of eight production facilities operated by Moha Soft Drinks Industry
S.C., a leading Ethiopian beverage manufacturer. Established in 1993, the Dessie facility is
strategically located in the Southern Wollo Zone, approximately 401 km north of Addis Ababa,
covering a land area of 37,640 square meters. The plant is part of the MIDROC Ethiopia Group,
owned by Sheikh Mohammed Hussein Al Amoudi, and plays a crucial role in the company's
operations.

Product Portfolio

The Dessie Plant produces a range of popular beverages, including:

 Pepsi Cola
 Mirinda Orange
 Mirinda Apple
 Mirinda Tonic
 7UP
 Kool Mineral Water
 Tossa Minch Spring Water

These products are distributed across Ethiopia, contributing to Moha's 52% market share in the
country's soft drink industry.

Production Capacity and Infrastructure

The Dessie facility is designed to produce approximately 317,160 hectoliters of soft drinks
annually. The plant operates efficiently, utilizing modern machinery and adhering to Good
Manufacturing Practices (GMP) to ensure high-quality production standards. Significant
investments have been made in infrastructure and equipment to enhance production capacity and
meet growing market demands.

Corporate Social Responsibility

Moha Soft Drinks Industry S.C. is committed to corporate social responsibility, contributing to
various community initiatives. The company has paid over Birr 656 million in excise and sales
taxes to the government and has created 2,485 jobs, with 1,095 new employment opportunities
since its acquisition. Additionally, Moha has supported disaster relief efforts and initiatives for
HIV/AIDS victims, demonstrating its dedication to social welfare.

Future Outlook

Moha Soft Drinks Industry S.C. anticipates an average annual increase of 15% in sales volume
and corresponding profit growth. The company continues to invest in expanding its production
capabilities and market reach to maintain its leadership position in Ethiopia's beverage industry

a) Production System and Operating Strategies

Moha Soft Drink Factory in Dessie employs a batch production system, which is common in
beverage manufacturing due to the nature of drink flavors, packaging sizes, and periodic demand
fluctuations. The factory produces batches of carbonated drinks, fruit juices, and bottled water,
scheduling production runs based on customer orders and inventory levels.
Operating strategies focus on cost leadership and quality assurance to compete effectively in
the Ethiopian beverage market. By leveraging economies of scale in raw material procurement
(such as sugar, carbon dioxide, and packaging materials) and streamlining production processes,
Moha aims to offer affordable yet high-quality drinks.

Additionally, the factory places strong emphasis on delivery reliability — ensuring products
reach retail outlets on time, which is crucial in maintaining market share in Dessie and
surrounding areas. Operational efficiency is maintained through scheduled production runs
aligned with peak consumption periods, such as holidays and cultural festivals.

b) Capacity Planning

Moha’s capacity plan is shaped by local market demand, seasonal variations, and distribution
reach. For instance, during festivals like Timket or Meskel, beverage consumption spikes
sharply. The factory anticipates these periods by increasing production shifts, ramping up
inventory, and coordinating with distributors to ensure availability.

The factory uses historical sales data and customer forecasts to adjust machinery utilization and
workforce deployment. Capacity adjustments also account for maintenance windows to avoid
unexpected machine downtime, particularly in critical bottling and carbonation stages.

c) Production Process

The production process at Moha Soft Drink Factory includes the following steps:

1. Raw Material Procurement: The factory sources raw materials such as purified water,
sugar, fruit concentrates, carbon dioxide gas, and packaging materials (bottles, caps,
labels) primarily from regional suppliers, optimizing cost and delivery times.
2. Water Treatment: Since water quality is paramount in soft drinks, the factory employs
filtration and purification systems to ensure compliance with health standards.
3. Mixing and Carbonation: Ingredients are blended according to specific recipes, and
carbonation is introduced for carbonated beverages to achieve the desired fizz and taste.
4. Filling and Packaging: The drinks are bottled or canned using automated filling lines to
maintain hygiene and efficiency. Packaging is designed to appeal to local consumers and
protect product freshness.
5. Quality Control: Samples from each batch undergo sensory evaluation, chemical testing,
and microbial analysis to ensure safety and consistency.
6. Distribution: Finished products are stored temporarily before being distributed to
wholesalers, retailers, and direct customers within Dessie and neighboring towns.

d) Main Problems

Moha Soft Drink Factory faces several operational and strategic challenges:

 Frequent Machine Breakdowns: Aging bottling and carbonation equipment often

malfunction due to heavy usage and lack of preventive maintenance, causing production
delays and increased costs.
 High Labor Turnover: Skilled machine operators and quality control technicians
frequently leave for better-paying opportunities in larger cities, leading to a loss of
operational expertise and inconsistent production quality.
  Inconsistent Quality: Manual oversight in some production stages, such as mixing and
packaging, results in occasional variations in taste and product appearance, impacting
brand reputation.
 Supply Chain Delays: Disruptions in the supply of raw materials, especially packaging
components, sometimes halt production, highlighting the need for stronger supplier
relationships or local sourcing options.

e) Cost Reduction Without Sacrificing Quality

To reduce costs while maintaining quality, Moha can implement the following strategies:

 Preventive Maintenance Programs: Establishing regular equipment servicing schedules

to minimize unexpected breakdowns and prolong machine life.
 Lean Manufacturing Principles: Streamlining operations by eliminating waste such as
excess inventory, waiting times, and inefficient workflows.
 Employee Training and Retention: Offering competitive wages, career development,
and skills training to reduce turnover and improve worker competency.
 Strategic Procurement: Negotiating better contracts with suppliers, seeking local
packaging material producers, or bulk purchasing to lower input costs without
compromising quality.

f) Improvements for Productivity, Market Share, and Profitability

To enhance its competitive position in Dessie’s beverage industry, Moha Soft Drink Factory can
pursue these improvements:

 Invest in Automation: Upgrading machinery, especially in bottling and carbonation

lines, to increase production speed, reduce human error, and improve product
consistency.
 Product Line Diversification: Introducing new beverage flavors, sugar-free options, or
health-focused drinks to cater to changing consumer preferences and capture wider
market segments.
 Strengthening Supplier Relationships: Building long-term partnerships with reliable
suppliers for raw materials and packaging to ensure uninterrupted production.
 Expanding Distribution Channels: Leveraging partnerships with local retailers, cafes,
and restaurants, and exploring rural market penetration through mobile sales units.
 Branding and Marketing: Increasing visibility through community engagement,
promotional campaigns, and attractive packaging design to build customer loyalty in
Dessie and surrounding regions.

Conclusion

Moha Soft Drink Factory in Dessie is positioned to capitalize on local demand for quality
beverages through effective production systems and cost-focused strategies. Addressing
challenges like equipment maintenance, labor retention, and supply chain reliability will be
critical for sustaining growth. By investing in modernization and market expansion, Moha can
improve productivity, increase market share, and enhance profitability in Ethiopia’s competitive
soft drink industry.
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Part II: Workout Questions

3. Location Selection Using Factor Rating Method

In this method, several factors influencing the choice of location are identified and weighted
based on their importance. Each location is rated against these factors, and the weighted scores
are calculated to determine the best option.

Factor Weight Loc 1 Rating Loc 1 Score Loc 2 Rating Loc 2 Score

Facility utilization 8 3 24 5 40

Total patients per month 5 4 20 3 15

Average time per emergency trip 6 4 24 5 30

Land and construction costs 3 1 3 2 6

Employee preferences 5 5 25 3 15

Total Score 96 106

Conclusion: Based on the total scores, Location 2 (score 106) is preferred over Location 1 (score
96). This indicates that Location 2 is generally more favorable when considering all weighted
factors.

4. Center of Gravity Calculation

The center of gravity method is used to find the best location for a facility that minimizes
transportation costs. The coordinates are calculated using weighted averages of the locations and
their respective loads.

Xcg=178002800=6.36,Ycg=133002800=4.75X_{cg} = \frac{17800}{2800} = 6.36, \quad Y_{cg} = \

frac{13300}{2800} = 4.75
Thus, the center of gravity coordinates are (6.36, 4.75), which suggests the optimal geographic
location for the facility.

5. Best Location by Load-Distance Score

This method assesses the total load-distance, which is the product of population and distance to
potential facility locations, aiming to minimize transportation effort.

Census Population Distance to (11,9) Load-Distance Distance to (14,4) Load-Distance

A 4 6 24 14 56

B 10 10 100 10 100

C 20 1 20 9 180

D 14 6 84 4 56

E 20 6 120 8 160

F 40 8 320 0 0

G 28 11 308 5 140

Total 976 692

Conclusion: The location at (14,4) is preferred because it has the lower total load-distance score
(692) compared to (11,9) which has 976. This implies lower overall transportation cost or effort.

6. Cost Analysis and Location Decision

This analysis compares fixed costs, variable costs per unit, demand, total cost, and profit for
three potential locations to find the most cost-effective option.

Location Fixed Cost Variable Cost/unit Demand (units) Total Cost Profit (Price = 30/unit)

X 300,000 20 130,000 2,900,000 1,000,000

Y 700,000 16 130,000 2,780,000 1,120,000

Z 1,900,000 12 130,000 3,460,000 440,000

Volume suitability:

 For demand less than 100,000 units: Location X is suitable.

 For demand between 100,000 and 300,000 units: Location Y is suitable.
 For demand 300,000 units or more: Location Z is suitable.
Selected location: Location Y is preferred for 130,000 units demand due to its lowest total cost
and highest profit.

7. Plant Efficiency and Utilization

This question involves calculating the actual production output and measuring how efficiently
the plant operates relative to its design.

 Designed daily capacity:

30,000 cakes/hour × 10 hours = 300,000 cakes/day
 Actual production:
800 cakes/hour × 5 hours × 90% performance = 3,600 cakes/day
 Damaged cakes (1% damage rate):
1% of 3,600 = 36 cakes
 Good output:
3,600 - 36 = 3,564 cakes/day

Calculations:

 Utilization:

Utilization=Actual hours usedDesign hours=510=50%\text{Utilization} = \frac{\text{Actual hours

used}}{\text{Design hours}} = \frac{5}{10} = 50\%

 Efficiency:

Efficiency=Good outputDesigned capacity=3,564150,000≈2.38%\text{Efficiency} = \frac{\

text{Good output}}{\text{Designed capacity}} = \frac{3,564}{150,000} \approx 2.38\%

This shows the plant is currently utilized at 50% of available working time, but the efficiency in
terms of output vs. designed capacity is very low (~2.38%), indicating room for significant
improvement.