Defining bank branch trade areas for optimal distribution networks in mergers and acquisitions

Abstract

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Purpose This study introduces a methodology that combines geographic information technologies and consumer behaviour principles to define, delineate and quantify the trade area (TA) of a bank branch within the context of mergers and acquisitions (M&A). The goal is to design an optimal distribution network tailored to the needs of financial institutions involved in M&A activities.

Design/methodology/approach The paper presents a procedure for TA delimitation, grounded in a theoretical model supported by marketing and consumer behaviour theories, focusing on proximity, purchase frequency and product type.

Findings Addressing a gap in the literature, this study highlights TA delineation as a key element in marketing strategy, exploring its role in establishing optimal distribution networks, particularly for financial institutions engaged in M&A.

Research limitations/implications For simplicity, the study focuses on a single bank branch, rather than a broader dataset.

Practical implications The proposed methodology enables more accurate delineation of TAs in M&A processes, mitigating the negative effects often overlooked by banks during mergers and acquisitions.

Social implications This approach helps reduce the risk of financial exclusion for vulnerable clients, promoting social and economic equity and fostering a fairer, more cohesive society.

Originality/value This study is innovative in integrating geographic information science (GIS) metrics into location science, proposing fragmentation analysis to quantify the spatial structure and configuration of TAs. This approach departs from traditional practices, as these specific metrics have not been collectively applied in previous research.