1. Service Facility Location

2. Site Selection Considerations
1. Access: Parking:
Convenient ring roads and Adequate off-street parking
motorways Expansion:
Served by public transportation Room for expansion
2. Visibility: Environment:
Set back from street Immediate surroundings should
Sign placement complement the service
3. Traffic: Competition:
Traffic volume on street that may Location of competitors
Indicate potential impulse buying Government:
Traffic congestion that could be a Zoning restrictions
hindrance (e.g.., fire stations) Taxes

3. Competitive Role of Service Facility Location
Flexibility: Future economic changes and portfolio approach (multiple sites in different regions)
Competitive Positioning: Prime location can be barrier to entry
Demand Management: Diverse set of market generators (hotel near convention centre)
Focus: “Cookie-cutter” expansion (formula facility) and cannibalization

4. Breaking the Rules
Competitive Clustering (Among Competitors) (e.g. Auto Dealers, Motels)
Saturation Marketing (Same Firm) (e.g. An Bon Pain, Ice Cream Vendors)
Marketing Intermediaries (e.g. Credit Cards, HMO)
Substitute Electronic Media for Transportation (e.g. Internet Shopping)

5. Location Considerations

6. Geographic Representation
Location on a Plane Y
Destination j
Yj Euclidean
Origin i Yi
Metropolitan X Xi Xj

7. Effect of Optimization Criteria
1. Maximize Utilization (City C: elderly find distance a barrier) 2. Minimize Distance per Capita (City B: centrally located) 3. Minimize Distance per Visit (City A: frequent users and large population)
City A 3 * 2 * *
City C
City B 1

8. Estimation of Geographic Demand
Define the Target Market (Families receiving AFDC)
Select a Unit of Area (Census track, ZIP code)
Estimate Geographic Demand (Regression analysis)
Map Geographic Demand (3D visual depiction)

9. Single Facility Location Using Cross Median Approach
3 (W3=3)
Median =16/2 =8
2 (W2=1)
1 (W1=7)
4 (W4=5)

10. Huff Retail Location Model
First, a gravity analogy is used to estimate attractiveness of store j for customers in area i.
Aij= Attraction to store j for customers in area i
Sj = Size of the store (e.g. square feet)
Tij= Travel time from area i to store j
lambda = Parameter reflecting propensity to travel

11. Huff Retail Location Model
Second, to account for competitors we calculate the probability that customers from area i will visit a particular store j.

12. Huff Retail Location Model
Third, annual customer expenditures for item k at store j can now be calculated.
Pij = Probability of customer from area i travelling to store j
Ci = Number of customers in area i (e.g. census track)
Bik = Annual budget for product k for customers in area i
m = Number of customer areas in the market region

13. Huff Retail Location Model
Fourth, market share of product k purchased at store j can now be calculated.

14. Athol Furniture Site Alternatives4 1
State Park 2 3 A 5
Bluff lake Z 7 6 9
Railroad
Freeway
Major street
Park boundary
River
Census block group
Existing retail outlets
Potential sites 8 B Y 11 4 10 12 X

15. Athol Furniture Data
COMPETITORS’ STORE SIZES MAXIMUM SIZE LIMIT OF SITES
Store Sales area, sq ft Site Maximum sales area, sq ft
A , X ,000
B , Y ,000
Z ,000
MINIMUM TRAVEL TIME BETWEEN POTENTIAL AND EXISTING SITES
AND BLOCK GROUPS, Min
Census block group
Site A B X Y Z
RELATIONSHIP OF STORE SIZE TO MARGIN ON SALES, EXPENSES,
AND NET OPERATING PROFIT AS % OF SALES
Sales area, Margin Net operating profit
sq ft on sales Expenses before taxes
10,
15,
20,

16. Athol Furniture Demographics
MARKET DATA
Census block Number of Average annual Average annual furniture
group households income expenditures per household
$12,000-$12, $180
,500-9,
,500-20,
,000-over
,500-5,
,000-4,
,000-4,
,000-8,
,000-6,
,500-19,
,000-15,
,000-over
7640

17. Store Site Selection

18. Market Share Analysis