Research Reports from the Department of Operations

Document Type

Report

Publication Date

1-1-1983

Abstract

This dissertation concerns itself with development of a long-range planning model to assist commercial banks and other financial institutions in their efforts to expand or contract their retail outlet networks. A bank retail outlet is defined as either a full-service branch or an Automated Teller Machine (ATM). Market share equations have been developed for different types of retail deposits (services) in terms of the number of retail outlets present within a given geographical area, called a market. These market share equations are then incorporated into a mathematical optimization framework. Criterion function in the mathematical model to be maximized is the overall retail profits. The decision variables are the number of branches and ATMs to be opened or closed within each market and during any period in the planning horizon. Objective function of the mathematical model is nonlinear in terms of decision variables whereas the constraints are linear. The model provides several optional features both on the choice of variables and constraints. Therefore, the size of the model will depend on the options chosen by the user. A sequential Quadratic Programming approximation scheme was devised and successfully used to solve the mathematical program. A case study is presented in which the methodologies developed in this research were used within a particular retail market. The case study produced satisfactory results, in predicting market shares as well as solving the mathematical model. Finally, detailed discussion is given as to how the model can be used to generate different real world retail planning problems. Recommendations are made regarding new applications for the model and areas with potential for further development.

Keywords

Operations research, Banks and banking, Branch banks, Automated tellers, Nonlinear programming, Strategic planning--Mathematical models

Publication Title

Technical Memorandums from the Department of Operations, School of Management, Case Western Reserve University

Issue

Technical memorandum no. 517

Rights

This work is in the public domain and may be freely downloaded for personal or academic use

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