A drugstore is considering opening a new location at Shopping Center A, with hop

Question

A drugstore is considering opening a new location at Shopping Center A, with hopes of capturing sales from a new neighborhood under construction. Two nearby shopping centers, B and C, will provide competition. Using the following Information and the Huff Gravity Model, determine the probability that residents of the new neighborhood will shop at Shopping Center A.

Assume that  ? = 2

Requirements:

1. Provide step by step computations.

2. Explain and discuss the results (minimum 2-3 sentences).

Explanation / Answer

Answer to Part1.

First we calcuate the attractiveness of the shopping center A, B & C using the size of the stores and their respective distance with the formula atrractiveness= size/ distance^2

Hence

Attractiveness of A=3500/(4*4)=3500/16=218.75

Attractiveness of B=1500/(5*5)=1500/25=60

Attractiveness of C=300/(3*3)=300/9=33.33

Now, we calculate the total attractivenessi.e.= attractiveness of (A+B+C)= 218.75+60+33.33=312.08

Now we calculate the probability of Market Share of each store i.e.= Attractiveness of Each store/ Total attractiveness

Probability of Market share of A= (218.75/312.08)%= 70.09%

Probability of Market share of B=(60/312.08)%=19.22%

Probability of Market share of C= (33.33/312.08)=10.69%

Answer to Part 2

Now we know that as per the Huff Gravity model Probability of visiting a point= (size/distance ^2)/sum(Size/distance^2).

So the Probability of market share is high at Shopping Center A since the size of the store is very big compared to B and C and the distance in comparision to B and C is not very far as is the difference in Size.

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