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Lecture 6

GGR252 Lecture 6

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Stephen Swales

February 11, 2014 GGR252 Lecture 6  Global retailing o North America can be considered as a single entity in terms of a locational strategy  Locational decisions  Regional decisions  Establish trade area o Able to make decisions about the market area to appeal to  Site selection method = evaluating the potential sites (e.g., at the vertices) o Specific location (e.g., actual address)  Trade and service area analysis (market area delimitation) o Geography matters in commercial success  Question of where to locate  Which country?  Which cities/regions?  Where within the city? o Trade/market area o Which site within the market area (site selection)? o Techniques for market area delimitation  Normative models (e.g., theoretical, but are used in practice)  Thiessen polygon (distance/proximity) o “What should be” o Spatial monopoly technique  Converse breakpoint method (distance, and size/attractiveness) o Simple gravity model o Spatial monopoly technique  Huff model (distance, size, and probability) o Sophisticated gravity model o Overlapping markets o There is some chance that you can go to any destination based on the relative proximity and the relative size  Behavioural models  Market penetration techniques (Applebaum) o Customer spotting o “What actually is” o Where do your customers actually come from?  Normative models have one advantage over behavioural models  Behavioural models are unable to customer spot for a potential store location  Behavioural data was not readily available in the past  Normative models are able to suggest what likely will happen in the future o Relevant concepts  Distance decay, friction of distance  Disincentive nature of distance  Location and competition (hotelling)  Utility (distance, size, attraction)  Utility or the usefulness of the potential destination is determined by the distance (Thiessen polygon)  Utility or the usefulness of the potential destination is determined by proximity and relative size (Converse breakpoint)  Utility or the usefulness of the potential destination is determined by size and distance, but in a probability context (Huff)  Unifying/simplifying assumptions  Effectiveness of model o Techniques  Construction methods  Assumptions  Applications  Criticisms/limitations  Thiessen polygon technique o Construction technique  Draw construction lines between a centre and all adjacent centres.  Bisect each of the construction lines (i.e., measure exactly halfway along each line).  Extend the bisectors at right angles (90 degrees) to the construction lines until they meet other extended bisecting lines.  This produces spatial monopoly trade areas around each of the centres. o Construct the Thiessen polygon on a map of census tract data  Addressing partial census tracts within a service area  Centroid method o Draw the longest diagonals in the CT o Find the centroid in the CT o If the centroid is inside the service area, then keep it o If the centroid is outside the service area, then throw it out o By some chance, you could throw them all out, or vice versa  Proportional grid method o Count how many small grids make up the entire CT o Count how many small grids fall inside the trade area o The smaller the grid, then the more accurate  These two methods are not separate trade area methods o Both have significant weaknesses  Assumes even distribution of the population (e.g., 45% of the geography is equal to 45% of the population)  The land use could be recreational or industrial, in which we should not be using any of the CT o Both have advantages  Do not have to go to the field  Able to do by hand o “What the trade area should be” given the assumptions
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