Trade Area Analysis

1282 words - 6 pages

Trade Area Analysis: The Example of Best Buy in the Toronto Area
Part A: Trade area delimitation for Best Buy stores
1. There are 10 Best Buy stores shown on the map. They are almost evenly distributed all over Toronto. However, those stores are a little more concentrated in the southwest part of Toronto city, where are more densely populated. Apparently, Best Buy aims to serve all customers in Toronto. Each store is relatively some distance away from another to avoid overlapping market and at the same time cover larger market area.

2. Possible new locations can be identified, by applying Thiessen polygon technique to Map One. In theory, the vertices of boundary lines are ...view middle of the document...

The stores that are not under the influence of the new stores are Oakville, Heartland, Bramptch, Woodbridge and Ajax. The market areas for Sherway, Downsview, Leaside, Markham and Scarborough will be cut into smaller areas. As can be seen on Map Two, these market areas will be cut smaller and more even. In this way, more customers will be captured. The two sites are both in the vertexes of the polygons, which mean these areas are poorly served. Now consumers will be able to travel a shorter distance to a store.

5. Comparing East Site and South Site, they are both densely populated. Judging from the satellite image, most of the people live in houses and both areas are easily accessible. Although they will cause the market share to shift, the market areas for existing and new stores will be evener. The problem is “are there spaces for the new stores?” The theoretical locations are both inside residential areas. However, if we expand the potential areas, maybe it is easier to find one. Apart from finding a place to build the stores, opening new stores in the two locations is less likely to “cannibalise” their neighbours.

7. As can be seen, the downtown store and the Fairview Mall store are very close to the two of the possible new sites identified in Map One. The two stores are located in the region where were originally poorly served. Now consumers are better off as they now only need to travel a shorter distance and the stores are probably be able to capture more customers. However, the two stores are closer to the edge of the polygon meaning they might be a little so close to their neighbours that they start to compete with each other.

8. The smaller polygons indicate the regions that are relatively well served. If we are to close stores, in theory, closing a store in the area of smaller polygons will not cause too much inconvenience to customers. It depends on how long a customer will have to travel to another store after the closure of one and how it is compare with the distance he/she used to travel. In practice, there are also other factors that have to be taken in to consideration. For instance, it can be tricky when determining what the acceptable distance is to customers. Moreover, in reality, Best Buy stores are not identical. Some customers may prefer one store to another. Closure of a store can also mean there is space for your competitor.

9. To apply Thiessen polygon technique, there are several assumptions to make. We assume there is a disincentive nature to distance. This is very well proved in the real world. We also assume each store is identical. This...

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