Decision Sciences Journal of Innovative Education Volume 7 Number 1 January 2009 Printed in the U.S.A.
TEACHING BRIEF
An Entrepreneurial Application of a Geographic Information System Barbara K. Fuller and David A. Bradbard† College of Business Administration, Winthrop University, Rock Hill, SC 29733, e-mail:
[email protected],
[email protected]
INTRODUCTION Geographic information systems (GIS) are generally regarded as special types of decision support systems (DSS). A primary feature of GIS is the ability to link data to maps. For example, a typical GIS application enables decision makers to select a map location and the GIS will produce demographic information regarding the population within a specified radius of the location. This capability makes GIS an ideal tool for an entrepreneur who is trying to determine a good location for a new business venture. For an entrepreneurship course, usage of GIS provide a unique opportunity for students to experience the decision-making process that goes into determining the location of a new business. This process includes (1) selecting multiple locations, (2) gathering data via the GIS for each location, (3) analyzing the data, and (4) recommending the best location based on the analysis of the GIS data and the special needs of the business. These four steps are the basis of a project used in a junior/senior course in an entrepreneurship major.
THE GIS USED FOR THIS PROJECT The GIS used for this project is part of the city of San Francisco’s Enterprise Geographic Information System. This system was developed by the city to offer high-quality data and mapping services for the public. The system includes four subsystems: SFViewer, SFParcel, SFProspector, and CrimeMAPS. Together the four systems provide users with the ability to find locations, view a location, see an aerial view of a location, and generate reports. Regarding reports SFProspector produces demographic, consumer expenditure, and business/workforce reports. Each report is based on a selecting a specific location and a radius determining a circular area around the location. For the demographic report, frequency distributions are produced for such variables as age and race, household income and net worth, employment by industry and occupation, number of households, educational attainment, and household size within the specified radius. The consumer † Corresponding
author.
163
164
Teaching Brief
expenditure report provides expenditures in categories such as apparel and services, entertainment, health services, home furnishings, shelter, food and drink, and transportation. The business part of business/workforce report provides counts and listings of all businesses by type within the specified radius. With respect to the workforce report, a partial list of the variables includes distributions of establishments by size, industry, and SICS code; distributions of employees by occupation; and distribution of employment by establishment type.
PROJECT INSTRUCTIONS To start, teams of three or four students are formed. Each team assumes the role of a consulting firm working for Madison Smith, founder of “The Artist’s Collection” (see the Appendix for detailed instructions). The task for each consulting firm is using the GIS (a) identify three possible site locations for a new store from available property in the San Francisco Bay area and (b) recommend with justification the best of the three sites. After the teams are formed and the scenario set up, two class periods are required to instruct students on the nature of market segmentation and GIS. Two Web sites are used for this purpose. The first site used is the Claritas Web site at www.claritas.com. This commercial site has excellent case studies with real-world companies that enable students to quickly grasp the nature of this assignment. The second site used is San Francisco’s Enterprise Geographic Information System at http://gispubweb.sfgov.org/website/sfprospector/ed.asp. Although the site is very user friendly, we recommend instructors provide students with a tour of the site so that students realize the volume of information available and the full potential of the site. In our tour, we explore a specific property and start by looking at the trade area within a one-mile radius of the property. Using this property, we demonstrate the information available in the demographic, consumer expenditure, and business/workforce reports mentioned earlier. The data in these reports will serve as the core statistics for the project. The tour also helps students understand the concept of geographic layering of maps to create visual representations of data such as zip code boundaries or traffic counts. We end the class with a discussion of the evaluative criteria used for site selection and how it differs based on the type of retail firm. We also emphasize the importance of developing a presentation scheme that will help students focus on the most salient evaluative criteria for each location. This may include a comparative chart of the various locations or other organizational tools that compare or contrast the three possible sites. This usually takes a full class period. Following the instructional classes, the students need at least a three-week time frame to work on the assignment, write-up their paper, and complete their presentation. For the most part, teams meet outside of class, but are encouraged to seek advice from the instructor relating to any questions or problems with the project or Web site. Student deliverables include a report along with a cover letter to Madison Smith summarizing the report. Detailed contents of the report are found in the Appendix. Students are expected to use features of SFProspector such as the demographic and business reports as well as the earth satellite feature that enables
Fuller and Bradbard
165
visual inspection of the locations under study. Students are also encouraged to present findings in charts or graphs.
EVIDENCE OF EFFECTIVENESS There were 28 students in the class. Seven teams of four students were formed. The effectiveness of the project was measured in two ways. First, team performance on the exercise was analyzed. Second, students provided anonymous feedback through an eight-item instrument. Students were also encouraged to provide open-ended comments for each of the eight items.
Student Performance Analysis Most students were unfamiliar with GIS and were intrigued with the capability and potential of the system. Final projects from the seven teams exhibited two clear strategies. The teams making the most effective recommendations with substantial justification for their decisions organized their teams with their first goal being to identify the target market and the most salient evaluative criteria for site selection. These teams then evaluated each of the three sites against the criteria, made a recommendation and justified the selection using a comparison chart. PowerPoint presentations outlined the pros and cons of the sites showing aerial photos, street traffic counts, radius rings that established trade area boundaries, and competition in that trade area. There were three teams employing this type of strategy. At the other end of the spectrum, the least effective consulting teams presented results that lacked a plan for organizing the data, and therefore, looked more like a dump of information from the Web site. Students from these teams found it harder to make and justify site selection decisions for their client. We suspect that the least effective teams assigned one person to investigate one of the three sites, but never allocated time to integrate the results. There were two that made presentations that were ineffective. The remaining consulting teams had some of the characteristics of the most effective teams. Additional analysis of the recommendations made by of the seven consulting team revealed that the three top teams supported the same location recommendation. Of the remaining four teams, only one chose to include this location in their evaluation. One can only speculate as to why these decisions were made, but two trends seem to emerge when analyzing the consulting team reports. First, in two of the less effective team reports only lower priced properties were chosen to be evaluated in the assignment and in these reports, the lowest priced of the three was recommended as the best site location. Based on this analysis it may be reasonable to conclude that low price is a salient preconceived criterion that outweighs other decision criteria. The location versus price relationship may be worth discussing during the introduction of the project. Second, in two of the reports the consulting teams focused on data from only the demographic report in making their decision, essentially eliminating the statistics from the two other reports. It is interesting to note that all seven teams collected data from the three sources: demographic, business, and consumer expenditure reports. However, there was no evidence that the less effective consulting teams analyzed the data in either
166
Teaching Brief
Table 1: Results from the student effectiveness ratings (28 responses). Item 1. The GIS exercise was an effective method for demonstrating the use of these systems for making decisions on the location of a new business venture. 2. The GIS exercise was effective in increasing my overall understanding of how an entrepreneur determines where to locate a business venture. 3. The GIS exercise was effective in demonstrating multiple variables that must be considered in determining where to locate a business venture. 4. The GIS exercise was a more effective method for teaching how an entrepreneur must make decisions than a class case that is presented and discussed. 5. The GIS exercise was a valuable learning experience. 6. The GIS exercise was effective in increasing my confidence in making entrepreneurial decisions. 7. The GIS exercise was an effective team experience. 8. The GIS exercise was an effective exercise. Totals
Mean/Standard Deviation
Counts
4.31/.967
19/10/5
4.31/.930
13/11/2
4.41/.628
11/7/4
4.00/1.309
11/5/5
4.10/1.047
9/8/1
3.83/1.104
7/4/2
3.90/1.291
16/11/5
3.97/1.117 4.10/1.069
17/11/4 103/67/28
the business or the consumer expenditure reports in making their location decision. Although matching the target market with the demographics of the trade area provides a good first step, a considerable amount of data was under utilized in making the site location decision. This was especially true for the least effective consulting teams.
Student Feedback Analysis The eight-item instrument enabled students to rate the effectiveness of the project based on their experience. Each item used a scale from 1 to 5 where 5 is very effective, 3 is neutral, and 1 is not very effective. Students were also encouraged to provided open-ended responses for each item. Table 1 presents the items, item means, item standard deviations, and counts for the open-ended responses. The counts for each item are presented in the format x/y/z: x = total number of comments, y = number of enthusiastic comments, and z = number of comments suggesting project improvements. There were a small number of comments that we could not classify so y and z do not always add to x. One of the greatest benefits of this project is the excitement generated by students. The combination of real-world data to analyze, an innovative Web site that allows students to take advantage of their technology skill, and the capability to produce visual maps that clearly illustrate results creates a stimulating environment for learning. Students learn vital problem solving skills including
Fuller and Bradbard
167
how to condense, organize, and make sense of large quantities of information in a very visual simplistic format. In fact, student often comment on how much easier it is to understand data and see trends on visual maps than through rows and columns of numbers in spreadsheets or databases. The data in Table 1 confirm these observations. The means for seven of the eight items are near or better than four. There were a total of 103 comments from the 29 students. Of the comments, 65% were enthusiastic, and 27% made suggestions for improving the project. The remaining 8% were not classified. Enthusiastic comments tended to indicate appreciation of the exposure to such a powerful tool as GIS and the real-world nature of the project. Comments suggesting project improvement tended to be related to the choice of locale, a need for additional instructions, or time demands of the project.
CONCLUSIONS Many location decisions especially for small businesses are based on intuition or the recommendations of sales agent. Owners of small firms and entrepreneurial ventures have been excluded from using GIS and the accompanying business data because of the complexity and cost of such systems. However, with the creation of free economic development Web sites such as SF Prospector, smalland medium-sized enterprises have access to data in a format where they can make more informed site location decisions. Through a series of public–private partnerships, a number of cities across the United States are now in the process of creating GIS sites to take advantage of business recruiting opportunities. The end result is that many larger cities across the United States are supporting basic GIS Web sites that combine digital maps with key demographic and business data from the local market. As the sites become more sophisticated, they provide a plethora of local statistical information for use by corporations, entrepreneurs, and even homeowners to aid in decision-making processes. For this project, the SF Prospector site served as a valuable interactive tool illustrating classic stages of decision making (e.g., intelligence, design, and choice) in a real-world environment. This project used a real-life situation permitting students to use standard tools available in current GIS to make a location decision for determining the best site for a business. The tools available in GIS are not restricted to entrepreneurial decisions, since these tools can easily be adapted for devising projects in other courses such as information systems, economics, or public administration. Instructors in other disciplines interested in developing projects similar to the one described in this article may want to examine a new book by Kurland and Gorr (2006).
REFERENCE Kurland, K., & Gorr, W. (2006). Learning and using geographic information systems: ArcExplorer edition. Boston: Thomson Course Technology.
168
Teaching Brief
APPENDIX The Artist’s Collection A Location Decision Using GIS Data Madison Smith is a potential new business owner that has proposed opening, The Artist’s Collection, a retail store featuring a variety of handmade goods, ranging from women’s jewelry to one-of-a-kind pieces of art. In addition to jewelry, the store would carry various works of art, pottery, and women’s accessories. The Artist’s Collection hopes to become a destination shopping experience for those who seek to acquire one-of-a-kind items and have the ability to pay the artist for his distinctive talents. The business will be set up as a Limited Liability Company in order to separate the legal issues of a public business from the owners, as well as for the favorable tax situation this structure offers. The Artist’s Collection is in the retail arts industry and is classified as a Jewelry Store with an NAICS code of 44831 and an SIC code of 5944. The store will carry jewelry and other artwork from the local art community for customers seeking to purchase a unique look. There were 49,542 similar establishments in the United States in 2003 with 7,023 of them in California. The industry had sales of $26.9 billion in 2003, with a 5% increase for 2004. The jewelry business is seasonal, with February and May being big sales months, due to Valentines Day and Mothers Day. Also extremely important is the month of December, which has sales over twice as high as any other month. The jewelry business is highly fragmented with no single operation controlling more than 6% of the overall market. The Artist’s Collection’s typical customer base is an educated, middle– upper class female between the age of 35 and 54 who is married with children. She has a bachelor’s degree with a household income of over $50,000. She lives in a nonmetropolis community that has easy access to a more metropolis area and participates in activities including fundraising, working for political causes, and volunteer work. She is also active in a large number of organizations such as: parent associations, art associations, business clubs, health clubs, church boards, and civic clubs. The target market for The Artist’s Collection is not as concerned with buying things in volume as with the variety and uniqueness of the merchandise selection. Brand name and specialty foods, clothing, and accessories are important to this customer. Because brand names are important, she is willing to pay for quality and design. This woman loves to read romantic mysteries and her favorite type of movie is a foreign film, as well as those of the Sundance Film Festival. When shopping, instead of worrying about the price initially, she thinks of style as well as uniqueness. As an experienced shopper with a refined taste and excellent perception of quality, she has no need to shop around. Sometimes, she may find something when she isn’t looking, and other times she is shopping with a purpose. She listens to adult contemporary radio stations, watches the news on cable TV, and reads magazines such as Glamour, Vogue, and Working Mother. The Artist’s Collection will require approximately 900 square feet of retail space. Each piece of artwork carried by The Artist’s collection will be an original, handmade product chosen by the owner.
Fuller and Bradbard
169
Assignment: Your consulting team has just met with Madison Smith, the potential CEO of The Artist’s Collection who is looking to locate her business in the San Francisco Bay area. She is particularly interested in understanding more clearly the key elements underlying the location decision that would provide her with the most competitive positioning strategy. She would welcome your team’s location recommendation based on your research and analysis of the best fit of the customer profile with the various trade areas in the Bay area. Using the demographic information provided on the San Francisco’s Enterprise GIS program “SF Prospector” http://gispubweb.sfgov.org/website/sfprospector/ed.asp, your team’s job is to apply your resourcefulness to make recommendations to Madison Smith, the CEO of the company. Your team’s report should consist of a maximum of six pages double spaced. Charts containing supporting data from the GIS site as well as other computer and/or library sites should be provided as exhibits in the appendix as supplements to the report. All exhibits should be clearly labeled with headings and legends. References should be included for all data. The report should be accompanied by a cover letter to Madison Smith, the CEO, summarizing the most significant information detailed in your report as well as your location recommendation for The Artist’s Collection. (1) Identify three possible site locations from those available on the SF Prospector Web site and justify your team’s choices using the data available on the Web site. (2) Your team should define the trade area size, shape, and boundaries for each of the three areas. Identify the boundaries of the potential retail trade area using driving time and/or distance customers would be willing to travel to get to The Artist’s Collection and any natural or human-made barriers that might influence this travel time. Keep in mind that the San Francisco Bay Area is small, therefore, your trade area expectations should be adjusted proportionally. A one-mile radius is suggested as a starting point. (3) Using the demographic reports, create a chart that matches the target market of The Artist’s Collection with the characteristics of the three trade areas chosen by your team. Identify where similarities and gaps exist between the target market and the trade area demographics. Interpret these results for Madison Smith in a manner that will help her make the best location decision The Artist’s Collection. (4) A multitude of factors contribute to the total quality of a location. When looking for the right location for a retail business such as The Artist’s Collection, one should consider essential location factors including: visibility, accessibility, regional exposure, high density, growth, operational convenience, safety and security, and adequate parking. Using the earth satellite feature, zoom in on the three locations and check out the visible location criteria for these specific locations. Include this in your team’s report to Madison Smith. (5) Using the Business Report sections of the SF Prospector, outline the competitive environment for The Artist’s Collection. How many competitors are in the immediate retail trade area that your group defined above? How
170
Teaching Brief
would you evaluate the competitive environment for each of the locations? Be sure to include in the appendix a map of each trade area illustrating the competitive environment. (6) Other than the information identified above from the SF Prospector, what other factors would Madison Smith want to be aware of before making her final location decision? What other factors are critical to the success of a jewelry business? Barbara K. Fuller is an associate professor of Marketing and Entrepreneurship in the College of Business Administration at Winthrop University. She received her BS in Education from West Virginia University, MS in Textiles and Clothing from the University of Delaware, and Interdisciplinary PhD in Marketing, Consumer Economics, and Merchandising from the University of Tennessee. Her research interests include the semiotic analysis of clothing, global retailing, small business, and entrepreneurship. She is a member of the American Collegiate Retailing Association and American Marketing Association. She has published in Journal of Business Research, Clothing and Textiles Research Journal, Small Business Economics, and Journal of the International Academy for Case Studies. She serves on the board of directors for Business Expansion Funding Corporation in Charlotte, NC and Junior Achievement of York County. David A. Bradbard is a professor of Management Information Systems in the College of Business Administration at Winthrop University. He received his BS and MS in mathematics from the University of New Hampshire, and an EdD in mathematics education from the University of Georgia. His research interests include database management systems, electronic commerce, and the management of information technology. He is an active member in Association for Information Systems, Decision Sciences Institute, Southeast Decision Sciences Institute, and Association for Computing Machinery. He has published in the International Journal of Man-Machine Studies, Interfaces, Journal of Small Business Management, Production and Inventory Management, and Communications of the Association for Information Systems.
