Location preemption by oligopolists : evidence from the Singapore supermarket industry

Purpose: The purpose of this paper is to investigate whether new store locations by two incumbent supermarket chains in Singapore were consistent with a preemptive strategy. Design/methodology/approach: The methodology involved collecting store location data and using a geographical technique (Thiessen polygons) for inferring the existence of a preemptive strategy. Findings: The analyses revealed that while NTUC Fairprice’s (the dominant incumbent) new store location strategy was consistent with a preemptive strategy, the second ranked player’s (Cold Storage) was not. Being the dominant incumbent, NTUC Fairprice had the incentive (protect its dominant position) as well as ability (scale, low costs and a merchandise mix that appealed to the mass market) to adopt a preemptive strategy. Cold Storage, on the other hand, lacked both the incentive (appeal to the narrow expatriate segment) and the ability (scale or low costs) to follow a preemptive location strategy. Research limitations/implications: The analyses did not distinguish between the opening of large vs small stores because the data on store sizes were not available. The analyses focused on an earlier time period because the implementation of the analytical technique (construction of polygons) was more feasible during the timeframe. Practical implications: The paper identifies conditions under which it may be appropriate for firms to follow a preemptive strategy. Originality/value: The paper adopts a highly appropriate methodology (Thiessen polygons) that takes into account the locations of own as well as competitor’s stores for analyzing the new store locations by supermarket chains. The paper’s conclusions about the conditions under which preemptive strategies are likely to be adopted can be useful to future researchers as well as managers.