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scZoUnD [109]
3 years ago
9

Scenario

Business
1 answer:
ankoles [38]3 years ago
8 0

Answer:

Better Beans Coffee Company

1. Two markets that have the highest net revenue increases when adding a second store are:

B. Los Angeles and Orlando

2. The two markets that should be choose for a second market are:

E. Los Angeles and Houston

Explanation:

a) Data and Calculations:

Existing     Revenue    Second   Cannibalization  Revenue    Net Revenue                           Store                              Store         Estimate         Drop Due  Increase from

                                    Estimate                            Cannibali-       Market

                                                                                                   (Second Store

                                                                                                      Revenue

                                                                                                Cannibalization)

Los Angeles 4,050,000 $2,677,500      5%       $202,500          2,475,000

Houston        1,950,000    1,522,500      5%           97,500           1,425,000

Orlando        2,800,000    2,175,000    25%        700,000            1,475,000

Atlanta          2,240,000   1,695,000     30%        720,000             975,000

Chicago         2,150,000   1,735,000     40%        860,000             875,000

San Diego     1,900,000   1,505,000     20%        380,000           1,125,000

Portland        1,500,000   1,050,000     20%        300,000            750,000

Dallas           2,450,000   1,702,500     45%       1,102,500            600,000

Boston          3,150,000   2,177,500      35%      1,102,500           1,075,000

b) Cannibalization results from the reduction in sales revenue when a company introduces another similar product or store in an existing market.  Before making decisions based on cannibalization, management should study the market dynamics and set measurable criteria for making the choice to go for cannibalization or preservation of an existing market.  One of the best criteria for deciding on cannibalization is the net revenue from the second product or store after cannibalization.

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