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Cannibalization in a Competitive Environment

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  • Tammy Drezner

    (Department of Information Systems and Decision Sciences, Steven G. Mihaylo College of Business and Economics, California State University-Fullerton, Fullerton, CA, USA, tdrezner@fullerton.edu)

Abstract

In this article, cannibalization and its effects on location decisions in a competitive retail environment is investigated. The authors analyze maximizing market share while minimizing cannibalization using the gravity (Huff) model. The efficient frontier according to these two noncompatible objectives is constructed and illustrated on an example problem. An easy to implement analysis that provides insight into management decisions is provided. To illustrate the ease of implementing the model using Excel, a description of the spreadsheet along with the Visual Basic for Applications (VBA) code are provided.

Suggested Citation

  • Tammy Drezner, 2011. "Cannibalization in a Competitive Environment," International Regional Science Review, , vol. 34(3), pages 306-322, July.
    • Handle: RePEc:sae:inrsre:v:34:y:2011:i:3:p:306-322
    DOI: 10.1177/0160017610389328
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    References listed on IDEAS

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    1. H. A. Eiselt & Gilbert Laporte & Jacques-François Thisse, 1993. "Competitive Location Models: A Framework and Bibliography," Transportation Science, INFORMS, vol. 27(1), pages 44-54, February.
    2. Mason, Charlotte H. & Milne, George R., 1994. "An approach for identifying cannibalization within product line extensions and multi-brand strategies," Journal of Business Research, Elsevier, vol. 31(2-3), pages 163-170.
    3. José Fernández & Blas Pelegrín & Frank Plastria & Boglárka Tóth, 2007. "Planar Location and Design of a New Facility with Inner and Outer Competition: An Interval Lexicographical-like Solution Procedure," Networks and Spatial Economics, Springer, vol. 7(1), pages 19-44, March.
    4. Zvi Drezner & Atsuo Suzuki, 2004. "The Big Triangle Small Triangle Method for the Solution of Nonconvex Facility Location Problems," Operations Research, INFORMS, vol. 52(1), pages 128-135, February.
    5. Tammy Drezner & Zvi Drezner, 2004. "Finding the optimal solution to the Huff based competitive location model," Computational Management Science, Springer, vol. 1(2), pages 193-208, July.
    6. K. Sridhar Moorthy & I. P. L. Png, 1992. "Market Segmentation, Cannibalization, and the Timing of Product Introductions," Management Science, INFORMS, vol. 38(3), pages 345-359, March.
    7. Plastria, Frank, 2001. "Static competitive facility location: An overview of optimisation approaches," European Journal of Operational Research, Elsevier, vol. 129(3), pages 461-470, March.
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    Cited by:

    1. Blas Pelegrín & Pascual Fernández & María Dolores García Pérez, 2016. "Profit maximization and reduction of the cannibalization effect in chain expansion," Annals of Operations Research, Springer, vol. 246(1), pages 57-75, November.
    2. Tammy Drezner & Zvi Drezner, 2016. "Sequential location of two facilities: comparing random to optimal location of the first facility," Annals of Operations Research, Springer, vol. 246(1), pages 5-18, November.
    3. Wenxuan Shan & Qianqian Yan & Chao Chen & Mengjie Zhang & Baozhen Yao & Xuemei Fu, 2019. "Optimization of competitive facility location for chain stores," Annals of Operations Research, Springer, vol. 273(1), pages 187-205, February.

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