A decision support approach to achieve competitive advantage for a hypermarket chain

Aapo Siljamäki ()
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Aapo Siljamäki: Aalto University

Journal of Business Economics, 2022, vol. 92, issue 5, No 4, 809-827

Abstract: Abstract This paper describes the decision support approach used in the development process of the S Group's Prisma hypermarket chain in Finland. The management was looking for a new and sustainable operating model for the rapidly growing chain, and contacted the author to consult in the process. Fierce competition forced the search for new business ideas, tools and methods that would provide a clear competitive advantage. To find new perspectives, we decided to use statistical approaches and various decision support system options, such as multi-criteria modelling. A database was available for research and analysis, including data on purchasing behavior and key performance indicators (KPI). The approach had to take into account the role and impact of customers. It was highly important to include customer behavior in the analysis using shopping basket data. Shopping basket data was central in the current paper. From these, an observation matrix was created combining shopping basket data, product data and customer background information. Using multivariate methods, customer groupings and profiles were created with the data from the observation matrix. Using the customer profile and KPI data, a multi-criteria decision support system was produced to support strategic planning. The decision support system (DSS) model was created together with a market chain operational expert and an external methodological expert. We used the VIG software package developed by Korhonen (Belg J Oper Res Stat Comput Sci 27(3):15, 1987) to solve the problem because it is easy to use and requires no prior knowledge of computers or multi-objective linear programming models. Pareto Race plays a central role in the VIG system. The chain expert easily learned how to use and work with the model. The results were immediately visible and could be used to examine alternatives and assess their appropriateness. It was decided to present five different scenarios to the hypermarket chain management. The main objective of the development process was to develop a strategy that would provide the Prisma hypermarket chain with a long-term competitive advantage. Various models were developed and used to support the strategy work by analysing and exploring the data collected, prioritising and selecting decision options. Two currently retired managers (Mönkkönen, S Group, the chain manager, Prisma chain, Interview 02.06.2021, 2021), who were involved in the development process, rated the strategy process as very successful and the modelling carried out during the process significantly supported decision-making. The immediate help of DSS modelling for decision making comes from being able to provide decision makers with reasonable, better solution options to support their decision making. The final impact of decisions could be evaluated after a longer period of time, which in the case of the Prisma development project results means several comparable financial years. Finland suffered exceptionally badly from the financial crisis and the global economic downturn in 2008–2009. The Prisma chain has survived the periods and crises described above without any loss-making years, and the whole chain has grown from 16 units in 1992 to 68 units in 2020.

Keywords: Customer analysis; Multiple objective linear programming; Performance improvement; Retail; Hypermarket; Multivariate analysis; Shopping basket analysis; 90–10 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s11573-021-01065-6

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