Application of geographical information systems for the optimal location of a commercial network

Abstract

Purpose - The purpose of this paper is to study the optimization of the geographical location of a network of points of sale, so that each retailer can have access to a potential geographic market. In addition, the authors study the importance of the distance variable in the commercial viability of a point of sale and a network of points of sale, analysing if the best location for each point (local optimum) is always the best location for the whole (global optimum).

Design/methodology/approach - Location-allocation models are applied using p-median algorithms and spatial competition maximization to analyse the actual journeys of 64,740 car buyers in 1240 postal codes using a geographic information system (GIS) and geomarketing techniques.

Findings - The models show that the pursuit of individual objectives by each concessionaire over the collective provides poorer results for the whole network of points of sale when compared to coordinated competition. The solutions provided by the models considering geographic and marketing criteria permit a reduction in the length of journeys made by the buyers. GIS allows the optimal control of market demand coverage through the collaborative strategies of the supplying retailers, in this case, car dealerships.

Originality/value - The paper contributes to the joint research of geography and marketing from a theoretical and practical point of view. The main contribution is the use of information on actual buyer journeys for the optimal location of a network of points of sale. This research also contributes to the analysis of the correlation between the optimum local and optimum global locations of a commercial network and is a pioneering work in the application of these models to the automotive sector in the territorial area of the study.