What Are the Factors Affecting the Location of a Shopping Mall - Research Proposal Example

PART 2 – Mini Report Word Count: 2163 ID: Module Module Determining the best possible methodology for location selection for a shopping mall Executive Summary: This report aims at identifying the best possible methodology for location selection for a shopping mall. Location is one of the four pillars of success in the retail industry. Investors have different attitude to location and thus a more judgemental analysis must be undertaken. Multi criteria decision analysis is a well-established method aiding the decision making process. An exhaustive literature review for choosing a location in the retail industry is presented along with evidence on the Analytic Hierarchy Process and the Analytic Network Process being the best available. These methods are explained and examples and illustrations are given in the appendices. The report examines the limitation of ANP and AHP and also gives evidence of outdated methodologies. The report also offers a framework for future, more extensive research in the subject matter and also states the limitations of the research design. 1.1 Introduction This report discusses the decision making process and methodology of retailers on how to choose a location for a retail store. It aims at pointing out the various factors affecting the decision making process, by identifying the need for a scientific approach to the subject matter through the literature review. In the literature review, the traditional and current methodology for choosing a location are also noted and discussed. The report firstly identifies the research questions that need to be asked and the research objectives with relation to the questions. The literature review then analyses the findings of the literature. The next part of the report is the research methodology and design which sets out the basic approach to more extensive research on the subject. The final part is the conclusion in which the argument is put forward based on the results drawn from the literature analysis. This report is of extreme relevance to the retail industry, as it should be taken into account when choosing location or creating feasibility studies for opening a new retail store. 1.2 Background Traditional methods for choosing locations, especially for retail, are a thing of the past. More comprehensive and detailed methods are required to provide more convincing results (Cheng, Li and Yu, 2005). The need for more holistic and scientific was first identified by Bowlby, Breheny and Foot (1984) who acknowledged the various pressures inflicted upon retailers on their location selection and since then in the UK, the pressures kept mounting (Hernadez and Bennisson, 2000). Craig, Avijit and McLafferty’s (1984) research on selecting a retail store location selection concluded that a good location will not necessarily attract customers, but a bad location surely hampers profits and adversely affects market share. Similarly, VAN (1996) identified the process of choosing a location for shopping malls as a fundamental part of a feasibility study, indicating that its exclusion will most likely lead to failure. The feasibility studies for choosing location are suggested to include multi-criteria decision analysis (“MCDA”) and using the Analytical Hierarchy Process (“AHP”) or the Analytical Network Process (“ANP”) priorities will be assigned. Both processes use MCDA to analyse different criteria that are chosen by the decision maker. The main reason for their success is the fact they include qualitative and quantitative, tangible and intangible factors and are analysed in a simple, yet organised way (Skibniewski and Chao, 1992). 2. Literature Review The shopping lifestyles of western countries’ citizens have shifted from small, local shops to giant, regional shopping malls (Cheng, Li and Yu, 2005). Malls provide convenience and a selection of shopping “attractors” such as banks, cinemas and food courts (Reimers and Clulow, 2004). Finn and Louviere (1990) found that shoppers regard shopping malls as of high quality, large variability and offering the latest fashion has to offer, as opposed to small, local shops. In south-east Asia and Southern China, shoppers are increasingly drawn to shopping malls abroad, because of the lack of variability on offer and the busier lifestyles of today. Cheng, Li and Yu (2005) give the example of Hong-Kong where shoppers prefer to shop at regional malls in mainland China, rather than the traditional shops on the island. The location of a shopping mall is of great importance to investors, because of the high costs associated with property acquisition and construction and also the sunk costs incurred in relocating (Owen and Daskin, 1998). They will always ask which location can be more profitable, both in the long and the short term. The location of a shopping mall must be decided in the “investment feasibility study” of the “Shopping Mall Investment Plan” as indicated by Cheng, Li and Yu (2005); (Appendix A). Prior to the introduction of ANP and AHP, scientific literature found it increasingly difficult to choose a location for a shopping mall (Berry et al., 1988). Traditional location selection methods were based on mathematical modelling divided into two major categories depending on timing issues and the “probability distribution of uncertain parameters” (Owen and Daskin, 1998). These models were either Dynamic and Stochastic or Static and Deterministic. They were modelled so as to be affected by shopper’s behaviours, such as changing trends and patronage (Severin, Louviere and Finn, 2001) and internal governance (Brown, 1991). These models are limited to the choice of criteria and are increasingly less used in project management as different investors require different options. Furthermore, they are purely mathematical, thus less flexible and do not take into account the qualitative aspect of the Social, Economic and Environmental aspects of location choosing. Since the start of the 21st Century, there has been noticed an increasing trend in using MCDA for location selection (Easley, Valacich and Venkataramanan, 2000; Mahdi et al., 2002; Bell, Hobbs and Ellis, 2003). This is because of the flexibility given to investors in weighing the criteria and the more comprehensive methodology which includes qualitative and quantitative analysis. MCDA are analytical processes for selecting the most suitable decision by taking into account more than one criterion (Belton, 1990). The criteria and the importance of each must be known so that the investor can make the appropriate decision (Cheng, Li and Yu, 2005). The importance is given by investors and experts of the appropriate field. For each criterion a questionnaire is given to the investors and experts who give it a score, which are paired with each other resulting in one dominant option. AHP and ANP use MCDA to establish this option in more organised, scientific and comprehensive method. AHP is particularly important in group decision making (Saaty and Peniwati, 2008) because of the ability of experts to express judgment based on their experience, values and knowledge, so as to create in hierarchy in the criteria (Al-Harbi, 2001). Furthermore, with AHP and ANP all members of the decision making process are engaged and can affect the possible outcome. For this report, a series of criteria will be created so as to choose the best possible location for building a mall. Appendix B shows a list of possible criteria. The criteria are then paired for each option and are given a value based on their importance – see Appendix C. the criteria are organised in hierarchal fashion so that the most important one is also the most valuable (Saaty, 2008). The ANP is similar to AHP, but instead of putting the criteria in a hierarchal fashion, they are set as categories and sub-categories, where all the options are all paired and interconnected (Louviere and Gaeth, 1987). Appendix D shows a possible network. Belton (1986) pointed out the limitations of AHP and ANP. She noted that judgements cannot be evaluated by peers and also that the questionnaires used for the pairing of criteria can be a burden to experts and investors. Belton and Gear (1983), Forman and Saul (2001) and Dyer (1990) noted the possibility of “rank-reversal” whereby an unimportant criterion in AHP can be the reason of excluding the best possible option. Belton and Gear (1985) and Dyer and Wendel (1985) dismissed the AHP because it was not based on a theoretical framework, but Harker and Vargas (1987) and Perez (1995) illustrated the theoretical grounds on which AHP and ANP are based and also gave examples from the industry, government and small businesses. 3. Research Design 3.1 Research Questions and Objectives The research questions to be answered for the purpose of further research on this topic are: What are the alternatives to using ANP and AHP? - To investigate possible disadvantages that would make the process unfeasible. - To determine positive features on each process. - To identify the suitability of each process in retail. - To identify possible criticisms of ANP and AHP in literature and evaluate their credibility Why does location matter? To identify the factors affecting location selection. To develop possible criteria for the decision making process. What are the factors affecting the location of a shopping mall? - To investigate local and regional shopping trends. - To identify local and regional shopping mall successes and failures. 3.2 Data Collection Data collection for the criteria will be undertaken from literature. A questionnaire will be given to students to create a qualitative data set with aid from Berry et al., (1988) which will be converted to quantitative using the methods explained in the literature review. 3.3 Data Analysis Data Analysis will be undertaken as illustrated by Saaty (1994) and Meade and Sarkis (1998) for ANP and using the “prequalification formula method” for AHP as indicated by Russell and Skibniewski (1989). A Gantt chart of schedule for writing a more extensive report should be created. 3.4 Ethical Considerations Data for this research project is freely available, but some data will be drawn from research papers where informed consent is required. The nature of the research may require individual ethical considerations such as anonymity, confidentiality, risk of harm and voluntary participation, especially in for the questionnaires. 4. Discussion The ANP and AHP revolutionised the decision making process in the 80’s and 90’s. It should be noted that the latest criticism for any method was in 1990 and the literature lacks negative evaluations since then. These methods have been increasingly used in project management because of the sound conclusions with regards to decision making. It is currently well established in the literature, that when decisions have to be made with multiple criteria one of the aforementioned analyses must be used. Since Saaty (1980) published his book, there has been great activity in project management journals with examples from many industries and evolutions of the initial methodology. Both methodologies include simple mathematics, not mentioned in the literature review, which must be examined before creating a case study or a more extensive report. Because of the extensive literature available from all industries associated with ANP and AHP, the contribution to practice base will be limited. The report will be an illustration on how to choose a location for a shopping mall in the retail industry using these methods. A case study will be draw with imaginary data so that the report will give empirical evidence on the validity of the processes with respect to more traditional selection methods. 5. Conclusions Limitations to the methodology will be the ones mentioned in the literature review. However, because this case study must be empirical, the creation of data and/or a hypothesis may result in bias data. Furthermore, the questionnaire may not be created properly so that it focuses on key questions and this may result in an inability to draw conclusions or even worse, false conclusions. Another limitation to the questionnaire is that the answers should come from experts whose judgement is based on knowledge and experience. During decision making, it was found that cultural differences across business leaders, may affect their judgement (Martinsons, 2001). This would yield alternative results if the decision maker was a westerner in Asia or vice versa. Suggestions to methodology include the comparison of other decision-making processes. The criteria for selection must also be compared and analysed to understand the bias and cognitive behaviour (Myers, 1962) of the decision maker and thus any limitations that might arise in the process. Additionally, the ANP and/or AHP process could result in different conclusions if they were to be implemented in other industries or even in different sectors of the same industry. Therefore, additional to the alternative decision making processes, the AHP/ANP should be applied to another sector of the retail industry to compare results. The ANP and AHP methods are the most widely used multi-criteria decision making methods in project management. Several scientific articles mentioned in the literature review illustrate the validity of both processes and their domination over older methodologies. A more extensive report will provide a better insight to the application of these methods and using the above-mentioned literature, the more quantitative aspect. The conclusions from the analysis in this report result in either ANP or AHP being the most suitable, valid and detailed methods to choose a location for a shopping mall in the retail industry. List of References: 1. Al-Harbi K.M.A-S. (2001) ‘Application of the AHP in project management’. International Journal of Project Management Vol. 19, 19-27 2. Bell, M.L.; Hobbs, B.F. and Ellis, H. (2003) ‘The use of multi-criteria decision-making methods in the integrated assessment of climate change: implications for IA practitioners’. Socio-Economic Planning Sciences Vol. 37, 289–316 3. Belton V. (1986) ‘A comparison of the analytic hierarchy process and a simple ulti-attribute value function’. European Journal of Operational Research Vol.26, 7-21 4. Belton V. (1990) Multiple criteria decision analysis: practically the only way to choose. In: Hendry L.C. and Eglese R.W., editors. Operational research tutorial papers, 53±102 5. Belton, V. and Gear, T. (1983) ‘On a shortcoming of Saatys method of analytical hierarchy’. Omega Vol. 11(3), 228-330 6. Belton, V. and Gear, T. (1986) ‘The legitimacy of rank reversal - a comment’. Omega Vol. 13 (3), 143-144 7. Berry, B.J.L.; Parr, J.B.; Epstein, B.J.; Ghosh, A.; and Smith, R.H.T. (1988) Market centres and retail location: theory and applications. Englewood Cliffs, NJ: Prentice Hall 8. Boeing Company (2003) 7E7 site selection criteria summary. The Boeing Company, available from: accessed on [02 Aug. 12] 9. Bowlby, S.; Breheny, M.J.; and Foot, D. (1984) ‘Store Location: Problems and Methods 1: is locating a viable store becoming more difficult?’ Retail and Distribution Management Vol. 12 (5), 31-33 10. Brown, S. (1991) ‘Shopper circulation in a shopping Centre’. International Journal of Retail and Distribution Management Vol. 19, 17–24 11. Cheng, E.W.L.; Li H. and Yu L. (2005) ‘The analytic network process (ANP) approach to location selection: a shopping mall illustration’ Construction Innovation Vol. 5, 83–97 12. Craig, C.S.; Avijit, G.; and McLafferty, S. (1984): ‘Models of the retail location process: a review’. Journal of Retailing Vol. 60 (2), 5–36 13. Dyer, J.S. (1990) ‘Remarks on the analytical hierarchy process’. Management Science Vol. 3, 249-258 14. Dyer, J.S. and Wendel, R.E. (1985) A critique of the analytical hierarchy process. Working Paper 84/85-4-24, Department of Management, The University of Texas at Austin 15. Easley, R.F.; Valacich, J.S. and Venkataramanan, M.A. (2000) ‘Capturing group preferences in a multi-criteria Decision’. European Journal of Operational Research Vol. 125, 73–83 16. Finn, A. and Louviere, J. (1990) ‘Shopping-centre patronage models’. Journal of Business Research Vol. 21, 259–75 17. Forman, E.H. and Saul I.G. (2001) ‘The analytical hierarchy process—an exposition’. Operations Research Vol. 49 (4), 469–487 18. Harker, P.T. and Vargas, L.G. (1987) ‘The theory of ratio scale estimation: Saatys analytic hierarchy process’. Management Science Vol. 33 (1), 1383-1403 19. Hernandez and Bennison (2000) ‘The art and science of retail location decisions’ Retail and Distribution Management Vol. 28 (8), 357-367 20. Louviere, J.J. and Gaeth, G.J. (1987) ‘Decomposing the determinants of retail facility choice using the method of hierarchical information integration: a supermarket illustration’. Journal of Retailing Vol. 63, 25–48 21. Mahdi, I.M.; Riley, M.J.; Fereig, S.M. and Alex, A.P. (2002) ‘A multi-criteria approach to contractor selection’. Engineering, Construction and Architectural Management Vol. 9, 29–37 22. Martinsons, M.G. (2001) ‘Comparing the Decision Styles of American, Chinese and Japanese Business Leaders’. Best Paper Proceedings of Academy of Management Meetings. Washington, DC, August 2001 23. Meade, L. and Sarkis, J. (1998) ‘Strategic analysis of logistics and supply chain management systems using the analytic network process’. Transportation Research Part E: Logistics and Transportation Review Vol. 34, 201–15 24. Myers, I.B. (1962) Introduction to Type: A description of the theory and applications of the Myers-Briggs type indicator. Palo Alto Ca., USA: Consulting Psychologists Press 25. Owen, S.H. and Daskin, M.S. (1998) ‘Strategic facility location: a review’. European Journal of Operational Research Vol. 111, 423–47 26. Perez, J. (1995) ‘Some comments on Saatys AHP’. Management Science Vol. 41 (6), 1091-1995 27. Reimers, V. and Clulow, V. (2004) ‘Retail concentration: a comparison of spatial convenience in shopping strips and shopping centres’. Journal of Retailing and Consumer Services Vol. 11, 207–21 28. Russell, J.S. and Skibniewski, M. (1989) A structured approach to the contractor prequalification process in the USA. CIB-SBI Fourth Int. Sym. on Building Economics, Session D: 240±51Danish Building Research Copenhagen, Denmark 29. Saaty, T.L. (1980) The analytic hierarchy process. New York: McGraw-Hill 30. Saaty, T.L. (1990) ‘How to make a decision: the analytic hierarchy process’. European Journal of Operational Research Vol.48, 9-26 31. Saaty, T.L. (1994) ‘How to make a decision: the analytic hierarchy process’. Interfaces Vol. 24, 19–43. 32. Saaty, T.L. (1996) Decision Making with Dependence and Feedback: the Analytic Network Process. Pittsburgh, USA: RWS Publications 33. Saaty, T.L. (2008) ‘Relative Measurement and Its Generalization in Decision Making Why Pairwise Comparisons are Central in Mathematics for the Measurement of Intangible Factors The Analytic Hierarchy/Network Process’. Review of the Royal Spanish Academy of Sciences Vol. 102 (2), 251–318 34. Saaty, T.L. and Peniwati, K. (2008) Group Decision Making: Drawing out and Reconciling Differences. Pittsburgh, Pennsylvania: RWS Publications. 35. Schuyler, J.R. (1996) Decision analysis in projects. Upper Darby, PA,USA: Project Management Institute 36. Severin, V.; Louviere, J.J.; and Finn, A. (2001) ‘The stability of retail shopping choices over time and across countries’. Journal of Retailing Vol. 77, 185–202 37. Skibniewski, M.J. and Chao, L. (1992) ‘Evaluation of advanced construction technology with AHP method’. Journal of Construction Engineering and Management, ASCE Vol. 118(3), 577-593 38. Voluntary Arts Network (VAN) (1996) VAN briefing: Feasibility studies. Cardiff: The Voluntary Arts Network Appendix A – Shopping Mall Investment Plan. Adopted from - Cheng, E.W.L.; Li H. and Yu L. (2005) ‘The analytic network process (ANP) approach to location selection: a shopping mall illustration’ Construction Innovation Vol. 5, 83–97 Appendix B – Possible Criteria for location selection when undertaking a feasibility study for building a mall. Appendix C – Pair-Wise comparison scale for AHP Preferences. Adopted from Saaty (1990), Saaty (1986) and Schuyler (1996) Appendix D – Possible network for use in ANP for shopping mall location selection. Adopted from (Cheng, Li and Yu, 2005). Read More