Home Builder Supply a retailer in the home improvement industry, currently operate seven retail outlets in GA and SC. Management is contemplating building an eighth retail store across town from its most successful retail outlet. The company already owns the land for this store, which currently has an abandoned warehouse located on it. Last month, the marketing department spend $10,000 on market research to determine the extent of customer demand for the new store. Now Home Builder Supply must decide whether to build and open the new store.
To decide whether Home Builder Supply should build and open the new store, they need to consider several factors. Here are the steps they can follow to make an informed decision:
1. Determine the potential customer demand: The $10,000 spent on market research can provide valuable insights into customer demand. This research may include surveys, focus groups, or analysis of competitor data to assess the size and potential of the target market for the new store.
2. Analyze competition and market saturation: Evaluate the existing retail landscape in the area where the new store would be located. Assess the number and strength of competitors, as well as the market saturation. If the market is already heavily saturated or dominated by competitors, it might be more challenging for Home Builder Supply to succeed.
3. Assess profitability and financial viability: Calculate the potential profitability of the new store by evaluating the expected revenue, considering the market demand, pricing strategy, and the company's costs (e.g., construction, operational expenses, staffing, marketing). Ensure that the new store's projected profits justify the investment.
4. Evaluate synergies and cannibalization: Consider how the new store would impact the existing retail outlets. Assess whether there will be any cannibalization of sales from the existing stores, or if the new store would create synergies that increase overall profitability.
5. Review customer convenience and accessibility: Analyze the location of the new store and its proximity to potential customers. Consider factors like traffic patterns, ease of access, parking availability, and visibility. A convenient and well-located store can attract more customers and contribute to its success.
6. Conduct a cost-benefit analysis: Compare the expected benefits (e.g., increased revenue, market share, brand recognition) with the costs associated with building and operating the new store. This analysis should consider short-term and long-term impacts on the company's financials.
7. Assess risks and mitigation strategies: Identify potential risks associated with building the new store such as changing market conditions, economic downturns, or construction delays. Develop contingency plans to mitigate these risks and ensure the company is well-prepared to handle any challenges.
By systematically evaluating these factors and considering the findings from market research, Home Builder Supply can make an informed decision on whether to proceed with building and opening the new store.