Starabucks

One of my subjects I have is called Operational Management and the introduction to one of the chapters is about Starbucks. I know few of you like Starbucks so I thought, if you are interested in learning a little bit about them, I'd share with you part of the intro so here you go:

Starbucks general approach to site selection
Starbucks has achieved a phenomenal rate of growth due in part to location analysis and site selection criteria. In some heavily populated areas such as New York City, it seems that there is a Starbucks every few blocks. And indeed, on Manhattan’s upper west side, there are eight Starbucks within a one square mile area between West 66th and West 86th streets!

In its early years, a small group of Starbucks executives made site selection decisions based of largely subjective analysis. Now, the company uses spatial modeling and extensive analysis of demographic information to identify and analyze potential locations.

Spatial modeling
Unlike many other retail chains, Starbucks does not accept credit cards or checks because most of their customers pay cash. Starbucks conducts periodic store intercept studies to aid in location analysis and site selection. Maps are used to calculate walktime trade areas. The number of potential customers in an area, say a 10-square-block area of a given business district, is utilized to calculate how many people could walk to a store within two minutes, how many people could walk to a store with four minutes, and so forth. As walktime increases, the number of potential customers decreases. A similar approach is used in analyzing suburban locations when drive time is the consideration. Maps also are used - based on consumer proximity figures plus demographics data (e.g., disposable income figures) – to pinpoint hotspots for gourmet coffee consumption.