Competition and Location Strategy in Branch Banking: Spatial Avoidance or Clustering

Location strategies of broad-line retailers: an empirical investigation

“…Avoidance, on the other hand, can be seen as an ''offensive'' strategy by retailers to serve a potentially underserved area and differentiate themselves from competition. Observations about cumulative attraction, differentiation, offensive, and defensive strategies made by Lord and Wright (1981) are all consistent with proximity and distancing.…”

“…When consumer accessibility and time spent shopping are important to consumers, firms attempt to avoid competition, develop a spatial monopoly, and minimize customer travel time (Schmidt and Lee, 1979). Lord and Wright (1981) observed that clustering of banks can be seen as a defensive strategy to follow one or more banks into an area to hold on to the customer base. It is an attempt to offer locational convenience to existing customers as opposed to capturing competitors' customer through differentiation.…”

“…In addition, it is carried out at a microlevel with individual stores as the unit of analysis, and therefore offers retailers implications in terms of locating near and away from competitors. Third, while strategies of clustering and avoidance have been alluded to for other types of retail outlets such as bank branches and fast food restaurants (e.g., Ishizaki, 1995;Lord and Wright, 1981), the use of proximity and distancing as location strategies by mainstream retailers, in general, and specifically, broadline retailers has not been investigated. Broad-line retailers have a dominant presence in many different product categories.…”

“…Studies on spatial competition have focused on the number of convenience stores in a geographic area (Schmidt and Lee, 1979), the spatial competition of bank branches (Lord and Wright, 1981), the structural and spatial trends in Japanese fast food outlets (Ishizaki, 1995), the market structure and retail structure of gas stations (Ingene and Brown, 1987), spatial competition between different types of stores-grocery stores and gas stations (Ingene, 1983), and, more recently, on the saturation of sporting good stores, the quantity and quality of service offered, as well as store scale in a given area (Miller et al, 1999). However, there is little found in the literature conceptually and empirically on (1) determinants of distance from competitive stores, (2) the strategies used by retailers based on distance, and (3) whether the strategies vary across different geographical markets or trade areas of stores.…”

“…Table 1 summarizes selected studies related to the market structure -retail structure relationship. With the exception of Lord and Wright (1981) and Ishizaki (1995), all the studies have been carried out at the MSA level or at the macrolevel. The two exceptions are mostly empirical and demonstrate the use of the nearest neighbor statistic in studying spatial patterns.…”