Grocery Store Decision


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Hello dear community.

Hope everybody is okay.

Sorry to came to you with so much urgence, but I really need your help. I have the following case and I already evaluate every single option htat I know without sucess to solve it and I was hoping if can help me with it. It is really urgent.

The owner of a grocery store is reconsidering its business and reviewing future strategies about how to expand and meet a changing customer demand. Sales have been good for some years and there are signals that they could increase even further. The owner of the store has three options:
 Enlarge its current store.
 Locate to a new site.
 Wait and do nothing.
The process for moving and expanding would take little time and therefore the store would lose revenue. If nothing were done, the first year and strong growth occurred then the decision to expand could be reconsidered. Waiting longer than 1 year would allow competition to move in and would make expansion no more feasible.
You have the following data:
 Strong growth has a probability of 55%.
 Strong growth with a new site would give annual returns of $195,000 per year. Weak growth with a new site would mean annual returns of $115,000.
 Strong growth with an expansion would give annual returns of $190,000 per year. Weak growth with expansion would give annual returns of $100,000.
 Staying at the existing store with no changes but strong growth, there would be returns of $170,000. In case of weak growth, the annual returns would be of $105,000.
 Expansion at the current site would cost $87,000.
 The move to the new site would cost $210,000.
 In case of strong growth and the existing site is enlarged during the second year, the cost would still be $87,000.
 Operating costs for all options are equal.

Which would be the proper methodology to solve this problem and which option will be the best.

Is all the information that I have. Have no more data.

I really thanks you in advance


This topic may be a case study by a student. Anyway, my thoughts on the issue of relocation is the adverse effect on the business. As stated in your premise, the business would lose revenue whether it expands the existing store or it moves to a new location. My question is this – why not do the reverse? Shrink the present store and create a branch in another location. The shrinking is not easy but it can be done depending on the situation particularly if the company owns the building and land.
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