KAM, Tin Seong

Institutional Knowledge at Singapore Management University

Singapore Management UniversityInstitutional Knowledge at Singapore Management UniversityResearch Collection School Of Information Systems School of Information Systems8-2007Mapping Better Business Strategies with GISTin Seong KAMSingapore Management University, tskam@smu.edu.sgFollow this and additional works at: https://ink.library.smu.edu.sg/sis_researchPart of the Business Commons, Databases and Information Systems Commons, and theGeographic Information Sciences CommonsThis Magazine Article is brought to you for free and open access by the School of Information Systems at Institutional Knowledge at SingaporeManagement University. It has been accepted for inclusion in Research Collection School Of Information Systems by an authorized administrator ofInstitutional Knowledge at Singapore Management University. For more information, please email libIR@smu.edu.sg.CitationKAM, Tin Seong. Mapping Better Business Strategies with GIS. (2007). Knowledge@SMU. 1-2. Research Collection School OfInformation Systems.Available at: https://ink.library.smu.edu.sg/sis_research/15857/21/12 Mapping Better Business Strategies with GIS (Geographic Information Systems) - Knowledge@SMU1/3knowledge.smu.edu.sg/article.cfm?articleid=1085   (http://knowledge.smu.edu.sg)Mapping Better Business Strategies with GIS (Geographic InformationSystems)Published: August 02, 2007 in Knowledge@SMU The value of location as a business measure is fast becoming an important consideration for organisations. GIS(Geographical Information Systems), with its capability to manage, display, analyse business information spatially,is emerging as a powerful location intelligence tool. In the US, Starbucks, Blockbuster, Hyundai, and thousands ofother businesses use census data and GIS software to help them understand what types of people buy theirproducts and services, and how to better market to these consumers. For example, McDonald’s in Japan uses aGIS system to overlay demographic information on maps to help identify promising new store sites.Singapore Management University information systems professor Kam Tin Seong is a strong advocate andpromoter of GIS as a tool for doing better business. Kam has over eighteen years of geospatial technologyexperience, including a stint with the United Nations Centre for Regional Development (UNCRD) in Nagoya, Japan. Heis also the author of over 40 scientific papers and a book on applied GIS and remote sensing.In Singapore, GIS is widely used by the public sector for urban development, infrastructure planning, environmentalmanagement and a host of other purposes although, increasingly, it is also being applied in the business arenaacross diverse industries such as retail, banking and healthcare. Knowledge@SMU talked to Kam about GIS ingeneral, and about his research project using GIS as a tool to better understand Singapore’s sizzling propertymarket.Knowledge@SMU:  What prompted you to promote GIS in business?Kam: More than 80% of organisation data are location-related – locations where transactions are done, whereretailers are found, and where the customers are to buy their products. Recently, there has been a growing interestin the business community to use GIS to enhance decision making processes at both strategic and operationallevels. The use of GIS in business, however, tends to be confined to simple map visualisation, mainly due to thegeneral lack of geographical concepts and geospatial analysis skills among business analysts. This is particularly truein Singapore whereby geography is considered a peripheral subject in school. To promote the appropriate use of GISin business, I believe it is my duty to pursue, capture, discover, create, and share knowledge about the waygeospatial information and technology are developed, managed, and used in enhancing business intelligence.Knowledge@SMU: Is GIS being used mainly for marketing research? Kam: No, it can be used for marketing research or to identify locations for new outlets -- what we call siteselection. It can even be used for sales territory planning, meaning that a business will know how to deploy its salesstaff so they don’t overlap with each others’ territories. GIS can also help optimise their “catchment” area.Understanding location is even more important when businesses go into new location such as China and Vietnam. ForSingaporean businesses it is even more important to have a better understanding of space because, over here, youcan get from one place to another within a few minutes. This is not so overseas. For example, MacDonald’s maptheir market potential using GIS in Malaysia but not in Singapore. In fact, MacDonald’s operations in other parts ofthe world use GIS as well.Knowledge@SMU: Does this mean that GIS is more useful to businesses in larger countries?Kam: Not really. It depends on how business managers utilise location intelligence in their business decision makingprocess. In Singapore, only a few companies use GIS to plan site locations or to understand their business potential,mainly before they venture overseas. GIS as a location intelligence tool is relatively new here. Many businessesassume that they know the local market very well. However, over time, you’ll notice that many of them open andclose outlets frequently. By and large, they make decisions based on gut feel instead of applying scientific methodsto help them decide where to open retail outlets to optimise their distribution network and maximise sales territory.In other parts of the world, such as in the US and Europe, they started using GIS in the late ‘90s. For example,Carrefour plan all their outlets using GIS; also MacDonald’s, Levis, insurance companies and healthcare providers.Even commodity markets monitor the production of agriculture and oil using satellite images to monitor vegetationgrowth so they can estimate how much [commodities] will be released into the market. For example, with palm oil,GIS can detect droughts in certain parts of the world leading to reduced production and shortages in the globalmarket. The commodity analysts may then decide to buy in and stock up; when the prices go up, they sell.7/21/12 Mapping Better Business Strategies with GIS (Geographic Information Systems) - Knowledge@SMU2/3knowledge.smu.edu.sg/article.cfm?articleid=1085Knowledge@SMU: How does GIS compare with conventional market research?Kam: In Shanghai, we were recently involved in a project to carry out a market research study using GIS. Theclient, a retailer, had previously engaged a market research company to study how the market in Shanghai operates.The director wanted to know where exactly the relevant channel stores that would help distribute their productswere located, so they could then decide on how many to start building relationships with. The study identified‘mama’ stores and other possible channels of product distribution and how they performed. This is a classical way ofdoing market research. For a `real’ operation, however, this is not enough. The research company didn’t know wherethese stores were, and whether they formed clusters spatially and so on. If they were randomly distributed, thenthe retailer would have to pump in a lot of resources to locate them and build relationships. But if they were inclusters, then they could target one group first before catching the rest.Knowledge@SMU: How did you use GIS to help this company make sense of the data?Kam: For conventional uses, such as land management and planning, GIS can map the data according to specialadministrative boundaries, as seen in thematic maps which show spatial patterns according to themes or attributes.These are sufficient for scientists and planners because they are easy to construct, but not good enough forbusinesses. A lot of people try to apply conventional GIS to business and misuse it. A thematic map has a lot offlaws because it misrepresents certain areas, especially for the clusters. For example, the retailer in Shanghai couldbe misled into thinking that the stores in a particular area are evenly distributed even if just one corner only had ahigh concentration of stores. That is why at SMU we are trying to deliver more appropriate and advancedmethodologies for businesses. We’ve devised this method, ‘kernel density estimation’, and integrated it into GIS toenhance its capability for business use.Knowledge@SMU: What was the final outcome for the retailer?Kam: They now have a better idea of where the hot spots are located, and can focus their resources on the highconcentration areas. Likewise, the SME supermarkets are not at the same locations. They now get better picture ofthe concentration and can start delineating and deploying their staff accordingly. They can also prioritise in thesense that they can find out the locations of the top 10% sales volume stores. If they have limited resources, theycan zoom in on these stores or areas first. The next part of the study was to find out the relationship between thehigh performing stores and the office locations. For example, the hypothesis is that more office workers are buyingthe expensive, high-end foreign products. There is a big difference in price; foreign products are RMB9 and abovecompared to RMB3 or lesser for local ones. We employed a spatial point patterns analysis method – bivariate Kfunction -- which allowed us to find out the relationship between high performing stores and the location of theoffice blocks. The statistical significance will tell us whether there are any relationships. Before that, you could onlyspeculate on the relationship. Now, businesses can prove certain hypotheses or assumptions observed in the field byusing the new methods we’ve incorporated into conventional GIS.Knowledge@SMU: What other research elements can you add into a GIS system?Kam: For example, I am now working on a study of the Singapore property market where we take transaction prices,map out the locations of these transactions, and then analyse the factors contributing to the price differentiation.I’m not just looking at the location and time, but also want to find out the factors that contribute to pricevariations. For example, the newspapers state that the central region will fetch higher prices, but what are thecontributing factors? These can be proximity to MRT (Mass Rapid Transit) stations, to the Integrated Resorts[Singapore’s new entertainment hub under construction] and so on. I try to relate the factors and test theirstatistical significance on price differences. Once we put our data into GIS, we can easily calculate the distancefrom a given property, for example, to the MRT, shopping mall, services etc.Instead of using conventional econometrics modelling techniques, I’m incorporating a new spatial statisticalmethodology called the ‘geographically weighted regression (GWR) model’ within a GIS environment to construct ahedonic house price model for Singapore. The GWR is a local modelling approach that explicitly allows parameterestimates to vary over space. One advantage of GWR is that the spatial patterns inherent in the parameterestimates can be easily mapped and visualised. For example, we could test if it is true that proximity to the MRTcontributes to relatively higher prices and so on. This will give you a more complete picture of what the contributingfactors are to price differences instead of blindly speculating as people do now. In addition, I can reverse themapping to find out the locations of properties where prices are highly affected by proximity to elite schools, publictransport and so on. All these factors will provide a more objective view of property prices, show more reasonablevalue of properties and, we hope, help to stabilise Singapore’s real estate market, the world’s hottest property thisyear. (#top) (#top)

Mapping Better Business Strategies with GIS

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Mapping Better Business Strategies with GIS

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