In response to bullet #'s 9 & 11. As part of the Phase III segment of the network design decision framework, Chopra & Meindl, (2013) asserts that a manager's goal, when locating facilities & allocating capacity should be to maximize overal profitability of the resulting SC network, while providing customers with appropriate responsiveness. Part of this design philosphy has to do with firms locating their stores & facilities near customers who value short response times.
The reason that SC managers may locate a single facility, or several facilities, near those of their direct competitors has everything to do with the Game Theory. Bartlett, Ghoshal, & Beamish (2008) defines Game Theory as an approach to determining a rational choice or optimum strategy in a competitive situation. Each entity tries to maximize gains & minimize losses under conditions of uncertainty and incomplete information. This process requires each entity to rank order preferences, estimated probabilities, and try to discern what the other entity is going to do.
Locating close to competitors can decrease SC marketing costs, boost customer base within a selected target market, and increase SC surplus, if the entity is maximizing the power of SC analytics (intereprettig & utilizing the data correctly). Locating a SC facility or factory near a competitor also boosts markeing. As an entity's competitor may have been located in the area for a few months or years, they have spent their money, and have had to absord the costs of letting their target audience know that they are there. Therefore, if an entity decides to move right next to their competition, then those are costs that the entity won't have to pay for, because their competitor already did. Secondly, it puts the entity right in the middle of the vehicular & foot traffic from the competitor's store...the competitor's customers will see the entity's facility, and will most likely take a look, particularly if both competitors sell the same products.
Chopra & Meindl, (2013) provides an example of this on page 112, in its discussion of positive externalities associated with business co-location. In the case of Suzuki, it was the first foreign manufacturer of its kind to construct a facility, and build a local supplier network in India. Suzuki's competitors waited & watch for Suzuki to not only bare the costs of setting up a SC network in India, but also to see how successfully the SC network adapted itself in the face of uncertainty in the region. Once Suzuki proved its longevity & resilience, its competitors followed suit.