Not afraid to fight with customers and quarrel like Azlee's roti canai stall with Mazlan in the Lagi-lagi Senario story?
The question of why next to McDonalds (McD) there will be Kentucky Fried Chicken (KFC) and next to Tealive there will be Chatime is because this is one of the strategies most companies do. This strategy is called the Hotel Location Model.
The Hotel Location Model from an economic point of view can be explained when both stores open at a midpoint known as ‘nash equilibrium’ where both get an equal number of customers.
A simple example to illustrate the Hotelling Location Model is when dealer A and dealer B who both sell the same product decide to open a store in the same area. Trader A opens a shop in the area on the left while trader B opens a shop in the area on the right.
To be fair, the number of customers is equal, the two traders decided to open a store in the middle point of the area known as 'nash equilibrium' which will see the two stores open next to each other in turn dividing the number of customers 50-50 each person.
Location plays an important role in opening a store, so traders will make a study on the most suitable location and according to their target market and because most stores want the same location, then they need to open stores next to each other.
