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Competitiveness Review: An International Business Journal

Impact of geomarketing and location determinants on business development and decision making
Veland Ramadani, Donika Zendeli, Shqipe Gerguri-Rashiti, Leo-Paul Dana,
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Veland Ramadani, Donika Zendeli, Shqipe Gerguri-Rashiti, Leo-Paul Dana, "Impact of geomarketing and location
determinants on business development and decision making", Competitiveness Review: An International Business Journal ,
https://doi.org/10.1108/CR-12-2016-0081
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Impact of geomarketing and location determinants on business development
and decision making

1. INTRODUCTION
In today's global markets, geomarketing is more important than ever, because it’s essential to
take advantage of opportunities like any open niches and get a step ahead of competitors. To
manage markets in an efficient way and to tap new potential ones are the keys to boost the
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business turnover. This is exactly what a geomarketing approach allows decision makers to do.
Companies of all industries across both, Business-to-business (B2B) and Business-to-customer
(B2C) sectors, can profit from a geomarketing approach to sales, decision making, marketing,
business development and expansion planning.
Success requires companies to pay attention to characteristics of the regional market.
Geomarketing is not only simple but is also straightforward, requiring only data related to sales
potential, GIS for visualizing and analyzing data and digital maps for relevant regional levels.
Having knowledge of locations, planning approaches, sales strategies and statistical methods is
as well as fundamental. Choosing the right location is also a pre-request for the success of the
businesses (Baaij, Van Den Bosch and Volberda, 2004; Ferreira et al., 2015). Location as a
factor of competitive advantages for companies by enabling them to succeed in local and global
markets as well (Akpinar et al. 2017). Which means that if a company is dependent on customer
traffic (and in fact, it absolutely is), they need to conduct a market survey to narrow down the
best site selection based on the research, data and analysis of certain important geomarketing
determinants.
Geomarketing is nothing but the integration of geographical intelligence into various
aspects of marketing and is the use of geographic parameters in marketing research methodology
(sampling, data collection, analysis and presentation). It is the practice of using geographic
information in the process of marketing activities and analysis. It also involves looking closely at
a specific area to study and analyzing specific trends or characteristics in order to incorporate
conclusions into the design and implementation of marketing activities or campaigns.
Geomarketing determinants and data have direct influence on the development of modern
trade and the reorganization of retail types. Site selection is being based on a scientific procedure

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that saves both time and money, and hence becomes automated. Whether businesses have a retail
location or not they need to pay attention to location of their customer and tailor their marketing
message accordingly.
The aim of this paper is to see the influence of geomarketing on business development
and decision-making process within businesses on Western Macedonia. Despite the fact that the
purpose of the paper could be a general framework for geomarketing, given the applied research
context, the goal will be accomplished through a survey and econometric model such as
Structural Equation Modeling (SEM) to analyze the influence of geomarketing on small and
medium-sized companies (SMEs). The paper will enlighten the geographic dimension of
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marketing on business development as well as on decision making processes. Given the complex
and diverse nature of businesses and markets in the country, it is especially difficult for decision
makers to comprehend the process of identifying opportunities and/or threats. As a result, the
implementation of geomarketing, its techniques and tools are of a great value and advantage for
businesses, particularly for further business development and making better decisions.
In this paper, we try to see the influence of geomarketing determinants, such as: location,
industry, socio-demographic factors and business factors on business development and the
decision-making process.
The paper is structured as follows: firstly, we introduce the literature review on
geomarketing worldwide, and afterwards we also provide an overview about its impact on
business development and the decision-making process of companies. In the following section,
we summarize the research of geomarketing and its determinants in the Republic of Macedonia.
Methodology is described in section three. The final part displays discussion of results,
conclusions, limitations and future research.

2. LITERATURE REVIEW
2.1. Geomarketing
2.1.1. Marketing and geography
Geography matters in every organization and every discipline. The use of the geography in
marketing is called geomarketing. Some authors define geomarketing simply as a “specific
application of the spatial economy” (Latour and Le Floch, 2001, p.37), while others (Cliquet,
2006, p.15) give a more comprehensive definition and description like “a collection of

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techniques enabling the manipulation of geo-coded data, it can help in analysis more than in the
conception of strategies and even less in decision-making” or “a marketing technique based on
the premise that individuals living in the same geographical location have socio-demographic,
economic and even cultural characteristics quite similar” (Lehu, 2004, p.365). Furthermore,
Yrigoyen (2003) considers geomarketing as a powerful marketing tool which helps decision
makers to solve some critical issues (geosegmentation and/or geopositioning) in market analysis.
“Tell me where you live, I will tell you who you are”.
This quote by Bernard (2003) is quite simple, but resumes very correctly the concept of
geomarketing. In essence, geomarketing is the integration of geographical intelligence with
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software into various aspects of marketing, which makes use of geographic information
parameters in marketing research methodology (sampling, data collection, analysis, conclusions
and presentation) and decision making.
The role and importance of location and space have increased inversely with market
expansion, even though the massive and daily use of internet has become a new form of
disappearance of geographical markets. Clients remain very precisely localized in geographical
space, which explains that the difficulties met by certain internet distribution companies in
delivering to their clients (Cliquet, 2001) and the companies although present on the web, still
originate from precise geographic zones (Volle, 2000).
Geomarketing is considered as a new dimension of brainstorming and solving problems
which integrates geographic information and knowledge by classifying and organizing the data,
analyzing and modeling certain processes and relationships. Several definitions are provided in
Table 1.
[Insert Table 1 about here]

2.1.2. Marketing and Geographical Information Systems (GIS)


Implementing geomarketing in a company also involves the use of Geographical Information
Systems (GIS). The acronym GIS stands for Geographical Information System. A GIS is a
computerized system that helps in maintaining data about geographic space, which is its primary
purpose (De By et al., 2001). GIS is a “computer system of materials, software and processes
conceived to allow the collection, management, manipulation, analysis, modeling and display of
spatial data in order to resolve complex management and development problems”, or

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“[c]ollection of data located in space, structured in a way that is able to conveniently extract
syntheses useful in decision making” (as cited in Didier, 1990, p.255). According to Cliquet
(2006) the American definition insists more on the computer aspects and the different operations
that a GIS should be capable of accomplishing, whereas the French definition is more general,
both in the form of the GIS and in its aims.
Giant corporations like Google, Facebook, Twitter or Instagram have admitted the rise of
geo-targeting and location-based services (Ali, 2004). More specifically, Facebook launched its
own location-based set of features-which every Facebook user can utilize them as well. Google
launched Google Latitude, an app which tracks the user’s location on an ongoing basis and
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Twitter released its geo-location feature which attaches a map to user’s tweets to show where the
user is tweeting from. Equivalent to this is the Instagram process when it comes to posting
photos by Insta users.

2.1.3. The importance of geomarketing


To link location with information is a widely-accepted process in the decision making of
businesses and communities. Choosing a site, targeting audience, focusing on market segment(s),
scheduling distribution network(s), allocating resources, responding to emergencies and similar
involve questions of geography. For example: Where are current and potential clients?, Where
customers with particular profiles do live?, Which areas of a city are urban and/or rural?, etc.
(ESRI, 2012, p.5).
Marketers, managers, retailers, real estate professionals, insurers, asset managers, health
organizations, urban consulting agencies, travel agencies and others are seeking to understand
markets better than ever before. Geomarketing supports the above-mentioned stakeholders in
many ways like: marketing, business decisions, analysis and research. Furthermore,
geomarketing assist firms to determine which products and promotions match lifestyles and
buying patterns of their customers in geographic perspective, identifying retail sites, making
spatial competition analysis; planning trade areas, predicting sales, designing sales segments and
planning advertising (Battista, 1995).
The practice of geomarketing is becoming easier and globally widespread, partially due
to the rise of location-aware hardware and software by companies, marketing agencies and
advertising professionals. KISSmetrics1, a blog about analytics, marketing and testing, explored

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geo-marketing by the numbers and made a survey-infographic about this issue. They concluded
that: 63% of smartphone users “frequently” use apps that require them to give their location;
90% of U.S. marketing agencies had clients requesting geographically targeted online ad
campaigns; 65% of companies are focusing on geographical context for their mobile marketing
tactics; 50% of the visitors to Google Maps only do business with the top 3 results; and hyper-
local marketing is cheaper, more effective than search engine marketing.

2.2. Geomarketing and business development


2.2.1. Location selection and expansion planning
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Territorial conquest has become the primary issue for all companies and especially retail
companies. Territorial coverage, both from region to region and on an international level, is at
least as important as sales in determining the strength of a store chain network (Cliquet, 2006).
Most of the business is being done locally. Every city, country or region has a lot of
organizations which target clients in a specific geographic area. A lot of managers, Chief-
Executive-Officers (CEOs) or entrepreneurs are targeting a market location or possible market
segments as a result of expansion planning on a local basis.
Selecting a business location or expansion planning, is part of the very general approach to
location of economic activities, as Thünen (1895) had already tried to describe. When seen from
the commercial business perspective, it assumes very precise characteristics. Distinguished
economists, such as Eaton and Lipsey (1982) and Hotelling (1929) have looked into this question
in order to understand where retail locations should be placed and why. Others have often
regretted the negligence suffered by the spatial variable in economic theories simply because the
distance variable is not taken into account (Isard, 1952) just because there is a lack of economic
explanation of the presence of economic activities in centers (Tinbergen, 1964), or because of the
spatial aspect of the neoclassical model (Eaton and Lipsey, 1976). Genarally said “location that
could effectively and positively affect the [business] development as well as that of the firm
performance” (Minai and Lucky, 2011, p. 110).
Companies have to integrate several tools developed by a variety of scholars not only to
create or analyze a market selection framework, but also for expansion planning. Some of these
tools are market demand driven models (Teoh, Welch and Wong, 1998), and others are long term
market potential assessments (Arnold and Quelch, 1998). Others are cultural dimensions for

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measuring cultural distance (Morosini, Shane and Singh, 1998) or they might be a competitive
analysis of an industrial sector (Porter, 1990).

2.2.2. Target group localization and segmentation


As crucial factor in evaluating turnover potential is determining how regularly the regions in
question are frequented by the desired target group. This often is calculated by specific target
group index that reflects the affinity of the population for the companies’ products which takes
into account information on age, gender, household size, purchasing power, lifestyle, as well as
living situation and customer behavior. 2
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Moreover, companies can evaluate client distribution, turnover and the performance of
their sales territories and business sites by analyzing regional market data which give them an
objective basis and to provide answers to the following questions: In which sites the company
can acquire new clients?; Which of them is best suitable for expansion planning?; How much
potential exists in those sites? and, Are there any possibilities to explore an additional sales
model?.
Global market segmentation can be viewed as the process of identifying segments whether
they are country groups or individual buyer groups of potential customers with homogeneous
attributes who are likely to exhibit similar buying behavior patterns (Hassan and Craft, 2005).
When targeting clients for new locations (especially international ones) and segmenting the
same, companies need to develop and implement a strong marketing which will have an
advantage in technological view in order to overcome the cost of foreignness (Kindleberger,
1969). According to Sakarya, et al. (2007), companies select several criteria when it comes to
market penetration, such as: long-term market potential, cultural elements, and competitive force
of the industry and customer receptiveness-this is especially obvious in emerging markets.
In an increasingly global and technology savvy marketplace where customer segments are
becoming homogenized across national restrictions, segments of behavior and lifestyle are a
necessary addition to geopolitical and economic segmentation in international markets (Aulakh
and Kotabe, 1993; Cho et al. 2016; Luqmani et al., 1994). There is a relationship between
strategic use of segmentation bases and strategic positioning, which has various strategic
marketing consequences for companies like opportunities for expansion, to transfer the products
globally and to develop more effective decisions (Good, 2014; Hassan and Craft, 2005).

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2.2.3. Redistricting market coverage
Another filed of geomarketing implementation in the aspect of business development in
redistricting market coverage by exploiting sales potential, field knowledge and geo-planning.
When it comes to planning and simulating market coverage, GIS are the ideal tool. They help
companies to structure sales areas in homogenous way according to market and/or turnover, to
balance customer portfolio, to plan an efficient organization etc. The main point of redistricting
market coverage is optimal provision of the market with sales services, in order to exploit better
market potential and to increase turnover.
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The conquest of space is not only planet-wide. It also occurs at national and local levels. At
national level, insufficient coverage can lead to great difficulties in terms of access to the
national media, this time for reasons of decline in audience and in terms of logistical costs
(Cliquet, 1998; Hisrich and Ramadani, 2017; Ratten, 2004). A spatial incoherence with “holes in
the coverage” is to be avoided, because this would involve higher transport costs and frequent
stock shortages (Rulence, 2000). Finally, it cannot be forgotten that proper territorial coverage
for the distributor ensures the manufacturer a good distribution of products under the same trade-
name-this is unquestionably an element of the distributor’s service.

2.2.4. Marketing management


The key point of the intelligent utilization of geographic analysis and data is the database, where
in marketing management perspective all the elements are expected to help the decision-maker in
understanding the localized markets (Bernard, 1996). Utilizing GIS software is fundamental, but
the quality of decision making and results will depend and vary of the geographic data. This
practice frequently is being called geo-merchandizing, which is “everything that takes place at a
place of sale in order to improve trade performance” or “all of the ways which help to move the
product in the store” (Wellhoff, 2001, p.7). Likewise, geo-merchandizing is a link, a practical
one but also complex, outside of actual databases between the company’s products and clients,
regardless whether they are local or international ones.
E-business should not be forgotten either, for the reason that merchandizing products are
presented on the Internet which is the main element to attract Internet users (Volle, 2000). E-
commerce has withdrawn as well the importance of marketing elements such as: availability of

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products, established prices, clients, competitors, suppliers and similar, which are often
underestimated. Actually, these conversions in the shape of trade can also be analyzed as a new
perspective to involve geographic dimension of trade, which has an influence on setting prices.
There are numerous normative location models that have been proposed for chain
companies like: banks or retailers (Lilien, Kotler and Moorthy, 1992). On the other hand,
promotion companies take into account geographic variables in order to increase the efficacy of
communication. This occurs especially when ‘delivering’ messages such as: catalogues, display
materials, prospectus and similarly. All of the above explain the increasing importance of
geographic information in advertising, where the last one “is not regarded as entertainment or an
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art form, but as a medium information” (Ogilvy, 2013, p.7).

2.3. Geomarketing and decision-making process


2.3.1. Decision support in spatial planning
When dealing with decision making processes, decision makers are often faced with spatial
issues that are complex and often have multiple alternatives to its solution. Historically, there
have been developed several analytical techniques to help decision makers solve these situations,
one example is location selection area (see: Starr and Zeleny, 1977; Cohen, 1978 and Nijkamp,
1979). Consequently, they (decision makers) have turned to analytical techniques to enhance
their decision-making capabilities (Meissner and Wulf, 2014).
Moreover, analytical techniques require the problem to be defined and to articulate
objectives for its solutions. Many spatial issues are ill or semi-structured (Alter, 1980; Hopkins,
1984) and the decision maker cannot define the problem or fully articulate its objectives.
However, to assist a decision maker in these situations, GIS must support the process by
providing a flexible and problem-solving environment. Such environment empowers the
decision-making process in many ways: (1) the problem can be explored to increase level of
understanding and redefine the definition and (2) generating and evaluating alternatives which
will enable the decision maker to investigate possible trade-offs between conflicts and solutions
(Densham, 1991).
Spatial decision support systems (SDSS) are type of GIS, but more advanced, which are
designed to support a decision maker on the research process for complex spatial problems. They
provide frameworks to integrate database management systems with analytical models, graphical

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display and tabular reporting capabilities. The continuous increasing interest in GIS and other
similar systems is very good news for decision makers, especially when they are faced with both,
long-term decision making (spatial planning, infrastructure management and strategic business
planning) and short-term decisions (emergency response and resource logistics).
In the ongoing text, we analyze how GIS and SDSS help companies to plan, organize and
develop their business.

2.3.2. Geodemographic data and decision making processes


The concept of geo-demographic data is relatively new and is derived from the combination of
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both, geographic and demographic information on population. Geodemographics offer data


reports which enable quick and easy analysis, and a better understanding of important business
factors when it comes to making decisions on certain issues. Namely, location reports allow
gathering information around a specific point or place on a map-such as nearby intersections and
traffic data for distances from that point. Geodemographics can be used also as a social
marketing tool in order to create information about ‘place’ and to target population (Petersen et
al., 2010).
Another industry for which geodemographic information is particularly important is
retailing, because decisions are capital‐intensive and locations themselves in short term are fixed.
Having in mind business factors, it is becoming even more important for retailers to observe their
trade areas, evaluate the influence of competition and choose locations strategically (Belyaeva et
al., 2016). Furthermore, these data can be used for segmentations based on identifying
demographically similar features like postcodes or smaller census collector districts. According
to Online Marketing Trends3 in 2011 QR codes were influenced mostly (by 31%) in comparison
to other technologies. Vendors of GIS or SDSS divide the country into segments of areas for
target marketing and other relevant questions like: Which should target market be?, Where are
they located?, and How to reach them?. Geodemographic segmentation works by grouping
together small areas with similar demographic profiles (Nelson and Wake, 2003).
Baines et al. (2012) profess that geodemographics are also an indispensable tool for
marketing management. Integrating census data with demographic information like socio-
economic data can guide to an abundant combination of ‘what kind of consumers live in a

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specific area?’, ‘what they are alike?’ and how 4P-s can be tailored according to these
characteristics?

2.3.3. Using business factor data for decision-making process


Nowadays, data have become a torrent flowing into every area of the global economy (Manyika
et al., 2011). Companies, day-to-day, gather and analyze data to make better decisions about
every single issue starting from product development and design, advertising to hiring. McAfee
and Brynjolfsson (2012, p.64) revealed that “companies in the top third of their industry in the
use of data-driven decision making were, on average, 5% more productive and 6% more
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profitable than their competitors” even after accounting for several confounding factors.
According to the same authors, big data helps decision makers to analyze, measure, and know
more about their companies, and directly translate it into improved decision making.

2.3.4. Marketing activities and geographic data


For geomarketing plan, geographic and customer data are stored in company’s databases which
are collected from different sources. This data is applied and integrated to one or more digital
maps, and can be focused on certain attributes so that analysts and forecasters can evaluate and
analyze any aspect of data they require. By integrating and implementing analytical tools, market
analysts can identify opportunities for market strategy and easily pass that data for review by
other decision-makers (Liu and Chen, 2015).
Geographical data applied for planning marketing activities can show: where customers
are?, how many different market segments are distributed in a given area?, what kind of
distribution routes are available?, what kind of market share has the company in comparison with
its competitors? and plenty of similar questions. Successful marketing activities can apply this
data to different issues, like:
 identifying possibilities for new markets;
 planning distribution areas and mapping delivery;
 territory planning for new retailing points, advertising, ATMs etc.
Companies that use more geomarketing, are those that have most access to location data.
Nevertheless, geomarketing can be used virtually by any business, since the digital technology
has been affordable to be implemented even for small businesses. What’s more, it involves

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tailoring marketing activities according to location where a company is operating, and it can be
used in any aspect of the marketing mix – product, price, place or promotion (geo targeting).

3. METHODOLOGY
3.1. General information
Method can be seen as a systematic approach, as a technique for data collection or as a research
strategy in analyzing a phenomenon (Dubois and Gadde, 2002). In this paper methodology
serves as a systematic approach referring to the inductive and deductive reasoning that is
exhibited on the literature review and as a research strategy which refers to goals set for
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development of the conceptual framework.


The selected sample group of our investigation is small to mid-sized companies. The
criteria for participating in this study included companies located in Western Macedonia.
Companies were divided into groups by city. We are well aware that nowadays location plays a
crucial role in business development and decision-making process of companies, but not only
that. Hence, further findings in our study ought to be understood while keeping this in mind.
Questionnaires were sent to them either electronically (by email or LinkedIn message via Google
Docs short URL) or personally (hard-copy). Descriptive analyses are presented in Table 2.
[insert Table 2 about here]

3.2. Data collected from questionnaires


For research purposes, we did a survey on 115 companies of several cities based in Western
Macedonia. According to our empirical findings 25 of 115 total respondents were females (22%)
and 90 of 115 total respondents were males (78%); 24% (27/115) of total respondents are part of
the age range from 21 to 30 years, 23% (27/115) of total respondents are part of the age range
from 31-40 years, 32% (37/115) of total respondents are part of the age range from 41-50 years
and lastly 21% (24/115) of total respondents were 51 to 60 years of age.
Regarding the education of respondents, only 3% (3/115) of total respondents have
finished primary school, 27% (31/115) of total respondents have finished high school, 46%
(53/115) of total respondents have faculty degree and 24% (28/115) of total respondents have a
master degree. Most of the companies, more precisely 44% of the total are located in the capital
city-Skopje, while 22% of them are located in Tetovo, 13% in Gostivar, 13% in Kicevo, 4% in

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Debar and 4% in the city of Struga. As far as we are concerned about the industry of companies’
data show, 20% of companies surveyed belong in the manufacturing industry, while most of the
companies – 73% belong to the service industry and only 7% of companies are part of other
industries such as: construction, handcraft etc.
Employment data from the survey indicate that 76% of all surveyed companies have up
to 10 employees, 10% of them have from 11 to 20 employees, 6% have 21 to 30 employees and
only 8% have more than 31 employees in their companies.
3.3. Source of data
According to ESS (Brancato et al., 2004) questionnaires constitute the basis of every survey-
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based statistical measurement and are by far the most important measurement instruments
statisticians use to grasp the phenomena to be measured. As mentioned before, the majority of
data are primary the ones collected by questionnaires and finally delivered electronically or in
hard-copy. Withal, mail surveys continue to be one of the major data collection modes, as the
method has its own quality, and the competence in terms of design has improved a lot (Dillman,
2000). Furthermore, the graphical layout of the electronic questionnaire plays an important role
in easing the interviewer’s job and preventing data capturing errors (Couper et al., 2000).

3.4. Sampling techniques


We have chosen probability sampling because it has a certain level of confidence in data
collection (MacNealy, 1999), and can be “rigorously analyzed to determine possible bias and
likely errors” (Henry, 1990, p.18). Since we analyze companies in Western Macedonia we use
Stratified Random Sampling - “one in which the population is divided into subgroups or ‘strata,’
and a random sample is then selected from each subgroup” (Fink, 1995, p.11). The population is
arranged in subgroups and then a random sample is selected from each of these subgroups
(Babbie, 1990; Fowler Jr., 1993; Henry, 1990).

3.5. Hypotheses
In this paper are set these hypotheses:
H1: Geomarketing determinants, such as: location, industry, socio-demographic factors
and business factors, have positive influence on business development.

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H2: Geomarketing determinants, such as: location, industry, socio-demographic factors
and business factors, have positive influence on decision making processes.

3.6. Econometric model


For our research purpose and analysis, we use Structural Equation Modelling as an econometric
model, which is a very useful and robust multivariate technique for analysis and incorporates
specialized versions of a number of other analysis methods. SEM encompasses a broad array of
models from linear regression to measurement models to simultaneous equations, including
along the way confirmatory factor analysis (CFA), correlated uniqueness models, latent growth
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models, MIMC models, and IRT models (Stata Structural Equation Modelling, 2013, p.2). Based
on the background of research and SEM, we present Figure 1 – The Structural Equation
Modelling (SEM). A Latent Variable Path Analysis (LVPA) where the path diagram has a casual
flow from top to bottom and wherein:
1. Straight arrows - represent direct effects and are used to define casual relationships.
Moreover, the variable at the tail of the arrow is causing the variable at the point;
2. Boxes/rectangles - represent observed and measured variables (in our research-
business development indicators and decision-making indicators);
3. Ellipses - represent latent variables (in our SEM model - geomarketing determinants).
The main idea lies in the theoretical concept that geomarketing determinants influence the
development of a business and their decision making, be it either for general decisions or either
for specific ones like: site selection, spatial planning or marketing activities related to 4Ps.
As follows, we present general concept of our SEM model.
The ongoing sections discuss the empirical findings of data gathered from the
questionnaires, and the analysis and interpretation of the SEM model and its results separately
for each hypothesis. We estimate our SEM model in two ways:
a) Measurement model – used to assess the proposed measurement model in SEM regarded
as a model fit. The significance of CFA consists on verifying measurement models
derived from classical theory (Dwyer, 1989; McDonald, 1985). Indices as R-square,
RMSEA (Root Mean Squared Error of Approximation) and SRMSR (Standardized Root
Mean Squared Residual) are used for determining how well the apriori model is fitting
the theory and often are referred as test of goodness of fit based on predicted vs. observed

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variables. Other indices as CFI (Comparative Fit Index), TLI (Tucker-Lewis Index) and
CD (Coefficient of Determination) are tests of goodness of fit comparing the given model
with an alternative model.
b) Path Analysis - Latent Variable Path Analysis (LVPA) provides a graphical overview and
empirical estimation of relationships to represent our assumed theory. It allows
‘translating’ and expressing the idea of how causes are related to effects into a model and
how the total effect of one variable on another can be broken down into direct effects.
[Insert Figure 1 about here]
The Structural Equation Model combines the measurement model with path analysis and
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takes the measurement error into account. Thus ‘adjusts’ the correlations and path coefficients
appropriately-assuming the model specification is correct.

4. DATA ANALYSIS AND INTERPRETATION


In this section, we present, analyze and interpret overviews of the research, and elaborate
outputs. The influence of geomarketing and its determinants is evaluated through SEM model (to
analyze the current situation) and multivariate regression (for future predictions and further
analysis). Respondents and their respective companies are anonymous without any exception,
and further comments only discuss general geomarketing determinants (ex. location, industry,
socio-demographic and business factors).

H1: Geomarketing determinants, such as: location, industry, socio-demographic


and business factors, have positive influence on business development.

While bearing the previous statement in mind, we build the following SEM model (as it is
mentioned previously only for this hypothesis) and analyze the results from Measurement Model
and Path Analysis, which explain the current situation of surveyed companies in Western
Macedonia and Multivariate Regression for future forecasts.
To measure business development of companies we selected and estimated three
indicators: Sales (total annual sales value), Products (total number of products, projects or
services sold in a year) and Clients (total number of company’s clients).

14
I. Measurement Model
This model is a multivariate regression model that describes relationships between the latent
variable and dependent variables. In case of H1 we obtain results from STATA 12 (Table 3)
[Insert Table 3 about here]
According to data from Table 2, geomarketing determinants influence the business development
of a company positively since p-values of all business development indicators (Sales, Products
and Clients) are less than the alpha levels for significance .05 and .01. Furthermore,
Geomarketing Determinants influence positively the total value of Sales with a coefficient of 1.
Similarly, the coefficient for Products is 1.24 and the coefficient of Geomarketing Determinants’
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influence on Clients is 1.25. All the above coefficients are strongly significant at level of 0.05
and 0.01.
R-square reports (Table 4) how well the variance is explained by each indicator. The
fraction of the variance of latent variable (Geomarketing Determinants) is 0.67 and shows that
latent variable explains for 67% dependent variables (Sales, Products and Clients). The
coefficients mc and mc2 also indicate a good correlation between variables in the model.
[Insert Table 4 about here]

II. Latent Variable Path Analysis (LVPA)

We estimated the SEM model in STATA 12 and the following figure (Figure 2) gives us an
overview of the current situation of 115 surveyed companies in Western Macedonia. It also
provides a picture of the direct effect of Geomarketing Determinants (latent variable) on
observed variables, respectively on Sales for 62%, on Products for 56% and on Clients for 69%.
In the SEM model constant for Sales is 6.5, for Products is 2.2 and for Clients is 2.4. Error
associated with observed variable indicators is 0.61 for Sales, 0.68 for Products and 0.52 for
Clients.

[Insert Figure 2 about here]

Table 4 includes Fit Indices of SEM model for the first hypothesis:
a) goodness of fit tests based on predicted vs. observed covariances like:

15
1. RMSEA (Root Mean Squared Error of Approximation) and
2. SRMR (Standard Root Mean Squared Residual)
The above stated indices indicate that we have an excellent fit since their values are less
than .05 and .01 (RMSEA=0 and SRMR=0).
b) goodness of fit tests comparing the given model with an alternative model like:
1. CFI (Comparative Fit Index) and
2. TLI (Tucker-Lewis Index)
Both indices have values equal to 1 and which points out that we have an excellent fit of
the model (CFI=1 and TLI=1). Lastly, the Coefficient of Determination (CD) is 0.67. It is also
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named as the R-square and is explained in a detailed manner in the section of Measurement
Model for H1 (Table 5).
[Insert Table 5 about here]
Graph 1 visualizes the influence of location on business development of all surveyed
companies. Moreover, it manifests the fact that business development indicators have a greater
increase of businesses who are located at biggest cities (especially in Skopje-capital city and
Tetovo) in Western Macedonia in comparison to other less-developed cities. Causes can be
different, for example: number of population (either customers or labor force), population
mobility, household composition, economic development of the city, market opportunities,
implementation of information technology, socio-demographic factors and other similar reasons.
Grewal, Levy, Mehrotra and Sharma (1999) allege that depending on type of location some
products or store’s location may become more or less appealing. This fact is equivalently linked
with number of products sold or clients and total value of sales. As a result of this we have
companies whose number of products sold, number of clients and the overall sales value is
greater than other companies, and all this is interrelated to the simple fact of location factor.
[Insert Graph 1 about here]
From a consumer perspective, convenient location(s) and product(s) assortment drive store
choice (Briesch, Chintagunta, Fox, 2009). Based on this, the evaluation of (potential) sites should
consider store location and assortment composition together. Therefore, retailers should
investigate strategic point of sales, managers and marketers should compile better routes of
distribution or to launch branches, and all of them should work together on building robust
strategies to turn them into sources of profit.

16
H2: Geomarketing determinants, such as: location, industry, socio-demographic
factors and business factors, have positive influence on decision-making process.

Similarly, as in the first hypothesis, we build the following SEM model for H2 and analyze
results from Measurement Model and Path Analysis, and Multivariate Regression. For measuring
decision making in companies we selected and estimated three indicators: L_DM (did and how
location characteristics influenced on companies’ decision making), I_DM (did and how industry
characteristics influenced on companies’ decision making) and SDBF_DM (did and how socio-
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demographic and business factors influenced on companies’ decision making).

I. Measurement Model

Uniformly, measurement model of the second hypothesis describes relationships between the
latent variable and dependent variables. Thus, after estimating data in STATA 12 we acquire the
outputs displayed in Table 5 and 6.
In compliance with data from Table 6, geomarketing determinants influence positively
decision-making process in a company since p-values of all decision-making indicators (L_DM,
I_DM and SDBF_DM) are less than .05 and .01. Furthermore, Geomarketing determinants
influence positively the total value of L_DM for coefficient of 1. Identically, the coefficient for
I_DM is 0.93 and the coefficient of Geomarketing Determinants’ influence on SDBF_DM is
0.61. All of the coefficients are strongly significant at level of 0.05 and 0.01.

[Insert Table 6 about here]

R² reports (Table 7) the fraction of variance explained by each indicator. Also, fraction of
the variance of the latent variable (Geomarketing Determinants) is 0.77, which shows that latent
variable explains for 77% dependent variables (L_DM, I_DM and SDBF_DM). A good
correlation between variables in the model is displayed also by coefficients mc and mc2.
[Insert Table 7 about here]

17
II. Latent Variable Path Analysis (LVPA)
In similar fashion, as in the first hypothesis we calculated the SEM model for the second
hypothesis. Figure 3 presents the summary and data of the estimated model in STATA 12.
The first thing we spotted is the direct effect of Geomarketing determinants (latent
variable) on observed (dependent) variables, which is on L_DM for 79%, 76% for I_DM and on
SDBF_DM for 44%. The second thing that can be noticed in the model is variable constant,
respectively L_DM constant is 3.2, I_DM constant is 3.4 and SDBF_DM constant is 2.9.
Error associated with observed variable indicators is 0.37 for L_DM, 0.42 for I_DM and 0.81 for
SDBF_DM.
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[Insert Figure 3 about here]


[Insert Table 8 about here]
Table 8 presents Fit Indices of SEM model of the second hypothesis:
a) goodness of fit tests based on predicted vs. observed covariances like:
1. RMSEA (Root Mean Squared Error of Approximation) and
2. SRMR (Standard Root Mean Squared Residual)
Both indices show that we have an excellent fit since their values are less than .05 and .01
(RMSEA=0 and SRMR=0).
b) goodness of fit tests comparing the given model with an alternative model like:
1. CFI (Comparative Fit Index) and
2. TLI (Tucker-Lewis Index)
Indices have their values equal to 1 and which indicates that we have an excellent fit of
the model (CFI=1 and TLI=1).
The Coefficient of Determination (CD), also called as R-square, is 0.77 and is explained
in details in the part of Measurement Model for H2.
The following graph (Graph 2) mirrors companies’ level of business development located
in Skopje, the capital of Macedonia, (marked with a green line) and the level of companies’
business development located in other cities of Western Macedonia (marked with a red line).
Clearly, companies in Skopje have a better level of business development than companies in
other cities. Besides companies’ level of business development in Skopje is approximately two
times greater compared to business development level of companies located in other cities. This
situation is analogical to the one the theoretical background emphasizes - location is a key factor

18
not only for business development of companies. Ultimately, a company being established in a
very good location has more opportunities for growth and prosperity than the other way round.
[Insert Graph 2 about here]
As claimed by Levy and Weitz (2004) the best regions for opening new stores are those
who generate the highest demand or sales, but according to Duan and Mela (2009), and Garber et
al. (2004) the problem lies in the fact that (potential) sales are not readily observed and do not
necessarily match with observed population density. The need for improved decision support in
business location decision making can be traced to the hitherto lack of both, relevant spatial data
frameworks able to characterize and distinguish intra-city business destinations, and the lack of
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relevant decision making models and methods to support and improve location choice (Weber,
2010). Moreover, Nelson and Wake (2003) propose geodemographic segmentation based on
identifying demographically similar postcodes or the smaller census collector districts.

5. CONCLUSIONS, DISCUSSIONS AND RECOMMENDATIONS


Since Republic of Macedonia is more than 25 years in transition, experts have often foreseen that
companies in our country most of the time make intuitive decisions and don’t take into account
many elements during decision-making process in the business aspect. But on the other hand,
results reveal interesting facts about companies involved in our research. For a majority of
companies, the influence of geomarketing on business development is positive as long as during
decision-making process its determinants have been taken into consideration and reviewed.
Besides, additional comprehensive analyses in the research claim that companies implement
geomarketing and geoinformation likewise for:
 site selection when picking an optimal location for their company, POS or branch
location;
 spatial planning for the store space, supply or retail chain and warehouse space;
 marketing activities related to product, price, promotion and place.
Eventually, along with new changes in market conditions and competition, there are
possibilities for implementation of geomarketing, GIS systems and use of geoinformation in our
country on a daily basis.
The following recommendations are for all operating businesses on the market:

19
 Making more data-driven decisions and refraining from their impulsive and intuitive
decision making, which is in most of the cases;
 Taking into consideration relevant factors when making important decisions, which
might influence their business;
 Reckoning and relying decisions on consolidation of existing networks, and
optimizing core competencies and business model to achieve a profit above the
industry average;
 Better identification and estimation of the domestic and foreign market (detailed
evaluation of clients, competitors, business partners, market changes, global trends
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etc.) in order to have better insights to strategical planning;


 Building market and target group potential databases that marketing endeavors will
generate good feedback and turnover, to identify potential markets for launching new
products and to know where advertising efforts have the greatest effect;
 Conducting geomarketing research especially in preliminary examines of retail
location or POSs.

6. LIMITATIONS AND FUTURE RESEARCH


As any research, this one has limitations due the nature of several elements. Firstly, non-
readiness of managers to respond questionnaire samples – most of respondents refused to fill out
the questionnaire in fear of disclosure of data. Therefore, as a result of the previous point, we
have to admit that the sample size of this research is very small to represent all companies in our
country. However, within the scheduled timetable of questionnaire delivery we managed to
survey and study 115 from 300 companies which we delivered questionnaires for geomarketing
research. Thirdly, because time is limited, we focused on surveying companies in Western
Macedonia, as well as because of the fact that this region is known as the most economically
developed in the country in comparison to others.
The empirical findings confirm that companies recently have started implementing
geomarketing, even though it is not in a very advanced level, it is worth to be examined and
explored. To all researchers, students or those interested in investigating this field, we
recommend that it would be very interesting and beneficial to do further research on how
companies use geo-information and compare the results with those investigated in this research.

20
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21
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Author Year Definition and implementation of Geomarketing


“Geomarketing is a marketing concept, which is expanded through consciously
picking up the spatial relationships of all business aspects. The “Who” (customer)
Nitsche 1998 and the “What” (product) are complemented with the “Where”. This extension is
completed and supported through the integration of a geographical information
system.”
“Geographical analysis in the sector marketing and sales is denoted with
Nattenberg 2000
Geomarketing.”
“Geomarketing is the efficient dedication of GIS technology by answering a
Bill & Zeher 2001
company’s spatial related question for economical success, used in S&M.”
“Geomarketing forms the connecting link between the geographical information
system as a technical component and marketing as a business concept. The
Kuchar 2002
geographical information system is hereby used for the integration, visualization,
procession and analysis of internal and external data with a spatial reference.”
“Geomarketing can be seen as a tool within marketing where it broadens and
strengthens marketing activities. It encloses a complete series of analysis and
GEODAN 2004
applications, which can improve marketing activities by making use of spatial
features of company’s information combined with other data on a map.”

Table 1: Selected definitions of geomarketing

22
Sample 115. The total number of surveyed companies was 150, but the total
number of the sample is 115. We only took into consideration surveys
that were totally answered, since was the best for the statistical model we
used.
What was measured It was measured the performance of the surveyed companies by their
location, industry, socio-demographic factors and business factors and
what is their impact on business development and decision-making
process.
Where these measures come from From the survey
How did the surveyed companies
perform: (mean values, standard
deviations, and loadings)?
Employees: • Sample Standard Deviation: 9.9389
• Population Standard Deviation: 9.896
• Sample Size :115
• Sample Variance: 98.7817
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• Population Variance: 97.9308


• Mean: 40.8435

Sales Value in Macedonian Denars • Sample Standard Deviation :660703687.199


(MKD) for the last year/ 1Euro=61.5
• Population Standard Deviation :657824790.336
denars
• Sample Variance :4.36529362278E+17
• Population Variance :4.32733454781E+17
• Mean :95875728.5304

Products Sold in units in the last year: • Sample Standard Deviation: 1766253.6813
• Population Standard Deviation: 1758557.55
• Sample Size:115
• Sample Variance: 3.11965206671E+12
• Population Variance: 3.09252465666E+12
• Mean: 246680.7478

Number of clients served in the last year: • Sample Standard Deviation: 193842.1205
• Population Standard Deviation: 192997.489
• Sample Size: 115
• Sample Variance: 37574767679.9
• Population Variance: 37248030760.3
• Mean: 30098.4522
Table 2. Descriptive analyses

23
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Table 3: Measurement model for H1

Table 4: Equation-level goodness of fit for H1

24
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25
Table 5: Fit indices for H1

Table 6: Measurement model for H2


Table 7: Equation-level goodness of fit for H2
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Table 8: Fit indices for H2

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GEOMARKETING
DERMINANTS
-location
-industry
-socio-demographic factors
-business factors
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Business
Development
-sales Decision Making
-products
- clients

Figure 1: Structural Equation Modeling

GEOMARKETING DETERMINANTS

.62 .56 .69

Sales Products Clients


6.5 2.2 2.4

Ɛ1 .61 Ɛ2 .68 Ɛ3 .52

Business Development Indicators

Figure 2: SEM model for H1

27
GEOMARKETING DETERMINANTS

.79 .76 .44


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L_DM I_DM SDBF_DM


3.2 3.4 2.9

Ɛ1 .37 Ɛ2 .42 Ɛ3 .81

Decision Making Indicators

Figure 3: SEM model for H2

28
15
Business Development Indicators

10

5
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Struga Debar Kicevo Gostivar Tetovo Skopje


Location

Sales Products
Clients

Graph 1: Influence of location on business development

Graph 2: Business development level of companies

29
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NOTES

1
For more information, please visit: https://blog.kissmetrics.com
2
For more information, please visit: http://www.gfk-
geomarketing.com/en/market_data/market_data_by_theme/roper_consumer_styles.html
3
For more information, please visit: http://www.onlinemarketing-trends.com

Authors:

Veland Ramadani is an Associate Professor at South-East European University, Republic of Macedonia,


where he teaches both undergraduate and postgraduate courses in entrepreneurship and small
business management. His research interests include entrepreneurship, small business management,
entrepreneurial marketing and business development. He authored around 80 research articles and 15
books. He also serves as a member of editorial and reviewer board of several international journals.

Donika Zendeli is MA of Marketing, South East European University. Actualy is working in Coordea,
which aim is to assist our clients in their day-to day activities, as well as long-term development
strategies. The Coordea team is made up of ambitious and creative people with the right mix of skills to
address the needs and preferences of our clients.

Shqipe Gërguri-Rashiti is an Assistant Professor and teaches mostly undergraduate courses in


management and information systems at College of Business Administration, American University of the
Middle-East (Kuwait). Her research interests include management, strategic management, management
information systems, etc. She authored around 20 research articles. Besides being a Lecturer she has
been also involved in managing different UNDP projects. In January 2016, Dr. Gërguri-Rashiti was

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awarded for Outstanding Teaching and Learning by American University of the Middle-East, Kuwait.
Among her recent books is the Female Entrepreneurship in Transition Economies.

Léo-Paul Dana is a Professor at Montpellier Business School and Marie Curie Fellow at Princeton
University. He obtained his BA and MBA at McGill University and PhD from the Ecole des Hautes Etudes
Commerciales HEC-Montréal. He served as the Deputy Director of the International Business MBA
program at NTU in Singapore, and on the faculties of McGill University, INSEAD, and the University of
Canterbury. He holds the title of Adjunct Professor at the University of Regina and the same at the
University of the South Pacific. He has published extensively in a variety of journals including the British
Food Journal, Cornell Quarterly, Entrepreneurship: Theory and Practice, Journal of Small Business
Management, Journal of World Business and Small Business Economics.
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