A Model for Allocating Retail Outlet Building Resources across Market Areas

Many factors affect retail outlet profitability, including market potential, distribution and product costs, market pricing levels, cost (and availability) of land or space, and the relation between share of outlets and share of market. This paper presents a model that was used to plan building decisions for outlets for a consumer product across time and market areas. The model has been in use for a number of years and has provided important input for budgeting and planning decisions. The implementation process for this model is also discussed. The model and its use provide an example of what we believe to be a “successful” management science application—the characteristics of and reasons for this success are discussed.