A hierarchical location model for locating bank branches in a competitive environment

Recent developments in the provision of banking services are expected to affect the structure and the organization of modern banks significantly. Consequently, it has also become necessary for most banks to reorganize their service network. In this context we demonstrate how demand-covering models may be combined with geographical information systems (GIS) to determine the optimal location of bank branches, taking into account the various factors that characterize local conditions within the demand area. The essence of the proposed models is to employ a GIS to represent various criteria concerning the demand for banking services (geographical, social, economic, etc.) as well as the competition in each particular area. This information is then taken into account by appropriate demand-covering models which determine the locations that achieve the maximum capture of the demand. Finally, we present some initial results concerning the application of this approach by a major Greek commercial bank.