Choosing a location for a business is a vital process that affects the operations and performance both in the short and long run. Generally, it’s advisable for business to be strategically located in order to attract customers and be accessible for easy supply of materials. Rahayu, Putri " Rini (2018) argue that business owners need to analyze their potential business locations in order to outdo competition and incur less cost of transport and communication.
The main concern in this scenario is to come up with two strategic locations for the Ms. Bud and Ms. Weiser along the beach. Given that they sell similar products, they operate in perfectly competitive market situation since their customers are aware of their products, prices, and specifications. Considering the fact that the customers are evenly distributed across the beach, all the factors to be considered by the two vendors seems equal. In other words, none of them of has undue advantage over the other in relation proximity to customers. According to Rahayu, Putri " Rini (2018), business choose strategic locations to be accessible to many customers and outdo the market competition. In this scenario, however, the population of customers is evenly distributed, thereby making any location across the beach a viable location for their businesses.
Black, Megehee " Fabian (2016), on the other hand, point out that vendors selling the same products, charging similar prices, and targets the same group of customers should group together to overcome the threat of competition. In this scenario, Ms. Bud and Ms. Weiser should find a common location in order to maximize the market share. Moreover, it becomes easy to regulate the prices charged, quality, and quantity offered. The following diagram shows a representation of the customer distribution and possible location points for the vendors;
Sea
Beach
Ms. Bud Ms. Weiser
Central Location (Optimal Point)
Evenly Distributed Customers
Main Land
Fig.1: Diagrammatical Representation of the Scenario and Optimal Point for Location
According to Black, Megehee " Fabian (2016), vendors such as gas stations often adopt the tactic of choosing a central location for their products thereby being situated close to each other. Similar scenarios are common in convenient stores in busy streets where the stores take advantage of their flow of customers and locate adjacent to their rivals.
From the diagram above, it is evident that both vendors locating at a central place will help the attract customers from all parts of the beach. Moreover, they can use the opportunity to pull their resources together, upscale their product, and service delivery. In the short run, every vendor will be threatened with possible competition hence try to avoid the cluster approach. As a result, they will be located at the opposite sides of the beach. The vendors will have the options of moving to other locations if their initial locations are not successful in maximizing their profits and increasing their market share. Given that all factors are assumed to be constant, it is arguable that the consumers will not be swayed by competitive strategies employed by any of the vendors. Therefore, the vendors will be able to get good customer flow irrespective of their location along the beach.
According to Black, Megehee " Fabian (2016), the vendors must take into consideration the challenges that the consumers will have while trying to access the products and services offered. For instance, locating at the common entry point will disadvantage customers who are already in the beach and would not want to come back to the common entry point to acquire the product. Moreover, location at one side of the beach will disadvantage other clients on the extreme opposite side who will have to take some time reach the vendors. Thus, the locations must address the challenges and barriers that might reduce accessibility and flow of customers.
Based on the above analysis, the zone of profitability will be a central place along the beach, where all the clients from various points can easily access. The first vendor, Ms. Bud, for instance, will pick a central place in the beach area where the sand bathers will easily buy drinks as they enter, when in the beach, and as they leave. Ms. Weiser, on the other hand should consider locating at the central point, few meters away from Ms. Bud. In case one vendor closes, the other vendor can still serve the sand bathers thereby blocking potential vendors from setting up in any of the locations. Setting up the shops at extreme ends or at entry point may create room for other vendors to set up their businesses in better locations thereby getting away their customers. Based on the idea of “zone of profitability”, the diagram below can guide the two vendors on how to utilize the central location.
Fig.2: Zone of Profitability: Optimal Location
In conclusion, the two vendors must move together in order to outdo competition and enjoy their market shares. The strategic location will be along the probability zone but centrally placed so that all customers can access the products easily. Given that the sand bathers are evenly distributed along the beach, the two vendors must select a spot that can accommodate them and help in barring other potential sellers from setting up new shops at strategic places. Thus, locating in opposite sides or the extreme places will create room for new entrants to set up their shops at the central point.
References
Black, J. A., Megehee, C., " Fabian, F. H. (2016). Small Business Identity And Entrepreneurial Identity In A Destination Resort Town: Are Birds Of A Feather Flocking To The Beach?. The Coastal Business Journal, 15(1), 77.
Rahayu, M. J., Putri, R. A., " Rini, E. F. (2018, February). Sustainable Street Vendors Spatial Zoning Models in Surakarta. In IOP Conference Series: Earth and Environmental Science (Vol. 123, No. 1, p. 012044). IOP Publishing.
