Center for Community and Economic Development

CCED » Economies

December 1996 No. 2

Business and Economic Development Applications Using Geographic Information Systems

By Bill Pinkovitz, N.R. Sumathi and Bill Ryan

The owners of a local hardware store are considering moving to a larger building and adding a lawn and garden department. They've asked you for help in analyzing the current trade area to determine if the market can support a larger store.

You've collected data on consumer expenditures for hardware and lawn and garden supplies, census data and traffic counts, sales of similar stores, past sales from this store and a profile of its current customers.

Unfortunately, you've hit a roadblock trying to "fit' all the data together. The data collected represents different geographic areas, time periods, and measurements. You turn to GIS as a tool to bring the data together to determine if it makes market sense for the hardware store to move and expand.

Geographic Information Systems (GIS) is a sophisticated decision-support tool to help professionals working in business and economic development. It is a computer database management system designed to collect, store, retrieve, manipulate and display spatial and tabular data in the form of digital maps and overlays. In essence, it takes statistical information and puts it into a visual format.

The use of GIS in business, "Business Geographics," enables you to combine a variety of data to create maps that help you visualize important businesses patterns in your community. Business Geographics utilizes economic, geographic, demographic, and psychographic data from public and private sources. Spatial relationships among data can be analyzed such as the relationships between a business, its customers and competition. Often, the ability to visualize data provides valuable insights that might otherwise be missed.

GIS Software: Traditionally, GIS software has been used for natural resources and infrastructure planning. The hardware and software to operate GIS were expensive. Significant technical expertise was needed to use the systems.

Today, there are many GIS programs that work on desktop computers. Some of these programs are designed for people who don't have the time to learn complicated technology. Nevertheless, there is still a learning curve

Typically, GIS software packages typically offer you the ability to geocode and load data (assign geographic coordinates), display data in a map, point to and retrieve data, spatial analysis (look at many layers of data and do queries), and perform "what if" analyses. It allows you to overlay one kind of information on another to find and visualize useful relationships in an area.

Decreasing software and data prices have made GIS more affordable for communities and businesses. Basic programs and data packages that operate on a 486 PC are being marketed as low as $500.

DATA: If GIS software is the vehicle that makes Business Geographics work, data is the fuel that drives it. Fortunately, there is plenty of data readily available. Some sources claim that 90% of all data is related to a specific geographic location.

Government sources such as the U.S. Census Bureau provide a significant amount of data useful in business geographics applications. In addition, many nationally recognized companies offer demographic, consumer expenditure, lifestyle, traffic, competition, labor market, and other data packages linked to geography. The variety of data available is almost overwhelming. You can also analyze your own data in relation to relevant secondary data.

Business and economic analysis using GIS is only as reliable as the data. Caution must be used when combining data from several sources. Users should have experience in data analysis.

One advantage of GIS is that it allows you to specify the geographic areas you want to analyze without the limitations of governmental boundaries such as county lines. It then fits the data to the geography you've chosen.

Applications: GIS is a tool that can improve the efficiency of business and economic development analysis. Sample applications include:

  • Trade Area Analysis: Incorporates drive-time, customer locations and physical and cultural barriers into trade area models. It can manage large amounts of data and overcome some of the problems of retail gravitation models.
  • Market Segment Analysis: Collect, store, retrieve, manipulate and visually display a variety of social and demographic data by customer segment to understand market potential.
  • Retail Site Selection: Analyze competition and consumer demand to identify opportunities for locating a business as well as the potential impact of new competition on existing businesses.
  • Industrial Site Selection: Identify location of suppliers, distribution points, transportation routes, utilities and other factors critical in site selection
  • Commercial Real Estate Analysis: Analyze locations of existing properties and their vacancies. Project the highest and best use of properties and their market value.
  • Other: Customer profiling, advertising planning, sales territory determination, business targeting, traffic audits, delivery routes, utility planning, economic development marketing, etc.

Business Geographics does for market analysis what electronic spreadsheets did for financial analysis. It provides access to much more information in less time. Like electronic spreadsheets, GIS levels the playing field and enables small businesses and communities to compete with their larger counterparts. Most importantly, it helps businesses and communities make more informed decisions about their futures.

There are many opportunities to apply GIS in community economic development. The Center for Community Economic Development is exploring these opportunities in an attempt to offer Extension educators and economic development professionals tools that can be put to work at the community level. Please let us know if you are interested in participating with us in this endeavor.