i need help in question 2 ,What is the expected annual net operating profit before taxes and expected market share for the outlet you have recommended? Defend your recommendation.

Athol Furniture, Inc. CASE 8.2 Athol Furniture, Inc. (AFI), is a growing regional chain of dis- count furniture and large-appliance stores. Management has targeted the small city of Bluff Lake as the next location for a retail outlet. Although the total population is currently 21,000, Bluff Lake is expected to grow during the next decade because of increased mining in the surrounding hills AFI's marketing department did a general analysis of the potential of market expansion into Bluff Lake, but the task of locating the best site for a store has been given to Mr. Carlos Gutierrez. After obtaining the market data on Bluff Lake Mr. Gutierrez decides it would be very appropriate to utilize the Huff location model in developing a recommendation for Chapter 8 Sicily Lis 241 the company's management. This is because there are existing competitors and several potential sites under consideration Figure 8.10 is a map of Bluf Lake showing major streets and highways, the railway (A will ship its merchandise into the city by rail from a regional warehouse 800 miles away). Crystal River, Bull Lake, and the census block groups (num. bered 1 through 12). Table 8.14 gives the number of house holds, average annual income per household, and average annual furniture/large appliance expenditure per household for each census block group. in Figure 8.10, the letters A and B show the locations of AFT's existing competitors, and Table 8.15 indicates the size of these existing stores to the nearest 5,000 square feet of sales area. The letters X, Y and Zin Figure 8.10 show the possible sites that Mr. Gutierrez les All could use for a retail store. The maximum size limit (ie, sales area) of each potential location is given in Table 8.16. On the basis of average speeds for the main streets and highways obtained from the city's planning department, Mr Gutierrez has developed a matrix of travel times between the existing and potential retail tes and the center of each cen Sus block group. These travel times can be found in Table 8.17. From experience with other API locations, Mr. Gutierrez has developed a fairly accurate portrayal of the relation ship between store size (ie, sales area) and margin on sales, expenses, and net operating profit before taxes. This informa tion is shown in Table 8.18 Questions 1. Utilizing a spreadsheet version of the Hull location model (with = 1.0), recommend a store size and location for . Assuming that all does not wish to consider a store that is smaller than 10,000 square feet, assess the store sizes based on 5,000-square-foot increments) up to the maxl mum allowable sales area for each potential site FIGURE 8.10 Bluff Lake - Major A 4 Cenas ek group Existing retail outlets O Pential sites TABLE 8.14 Market Data Census Black Avg. Annual Furniture/Large Appliance Expenditures per Household Number of Households 730 Group S180 1.035 350 Avg. Annual Income 65,000 70.000 45.000 50,000 80.000 85.000 150.000 over 25,000-30,000 20.000 25.000 20,000 25.000 40.000 45.000 30.000-35.000 85,000 90.000 75,000 80.000 150.000 over 1.755 265 290 7.640 370 242 Part Two Designing the Service Ex 4. Brietly state any shortcomings you may perceive in this model 2. What is the expected annual net operating profit before taxes and expected market share for the outlet you have recommended? Defend your recommendation. 3. Try two other values of (eg, 0.5 and 5.0) to measure the sensitivity of customer travel propensity on your recom- mended location. TABLE 8.15 Store Competitors' Store Sizes Sales Area, Sq. Ft. 10,000 15,000 TABLE 8.16 Mas s e Limit of AFI Sites Maximum Sales Area, Sq. Ft. 15,000 20.000 10,000 TABLE 8.17 Minimum Travel Time between Potential and Existing Sites and Black Groups in Minutes 7 Census Black Group Site 1 2 3 4 A 755 91 B 10 8 10 2 3 X 16 14 14 16 Y12 101012 2755 8 5 2 9 7 1 10 10 4 11 14 2 12 17 3 10 13 Operating Data TABLE 8.18 Relationship of size of Store to Margin on Sales, Expenses, and Net Operating Profit as Percent of Sales Net Operating Profit before Taxes Expenses Sales Area, Sq. Ft. 10.000 15,000 20.000 Margin on Sales 162 15.6 123 147 Athol Furniture, Inc. CASE 8.2 Athol Furniture, Inc. (AFI), is a growing regional chain of dis- count furniture and large-appliance stores. Management has targeted the small city of Bluff Lake as the next location for a retail outlet. Although the total population is currently 21,000, Bluff Lake is expected to grow during the next decade because of increased mining in the surrounding hills AFI's marketing department did a general analysis of the potential of market expansion into Bluff Lake, but the task of locating the best site for a store has been given to Mr. Carlos Gutierrez. After obtaining the market data on Bluff Lake Mr. Gutierrez decides it would be very appropriate to utilize the Huff location model in developing a recommendation for Chapter 8 Sicily Lis 241 the company's management. This is because there are existing competitors and several potential sites under consideration Figure 8.10 is a map of Bluf Lake showing major streets and highways, the railway (A will ship its merchandise into the city by rail from a regional warehouse 800 miles away). Crystal River, Bull Lake, and the census block groups (num. bered 1 through 12). Table 8.14 gives the number of house holds, average annual income per household, and average annual furniture/large appliance expenditure per household for each census block group. in Figure 8.10, the letters A and B show the locations of AFT's existing competitors, and Table 8.15 indicates the size of these existing stores to the nearest 5,000 square feet of sales area. The letters X, Y and Zin Figure 8.10 show the possible sites that Mr. Gutierrez les All could use for a retail store. The maximum size limit (ie, sales area) of each potential location is given in Table 8.16. On the basis of average speeds for the main streets and highways obtained from the city's planning department, Mr Gutierrez has developed a matrix of travel times between the existing and potential retail tes and the center of each cen Sus block group. These travel times can be found in Table 8.17. From experience with other API locations, Mr. Gutierrez has developed a fairly accurate portrayal of the relation ship between store size (ie, sales area) and margin on sales, expenses, and net operating profit before taxes. This informa tion is shown in Table 8.18 Questions 1. Utilizing a spreadsheet version of the Hull location model (with = 1.0), recommend a store size and location for . Assuming that all does not wish to consider a store that is smaller than 10,000 square feet, assess the store sizes based on 5,000-square-foot increments) up to the maxl mum allowable sales area for each potential site FIGURE 8.10 Bluff Lake - Major A 4 Cenas ek group Existing retail outlets O Pential sites TABLE 8.14 Market Data Census Black Avg. Annual Furniture/Large Appliance Expenditures per Household Number of Households 730 Group S180 1.035 350 Avg. Annual Income 65,000 70.000 45.000 50,000 80.000 85.000 150.000 over 25,000-30,000 20.000 25.000 20,000 25.000 40.000 45.000 30.000-35.000 85,000 90.000 75,000 80.000 150.000 over 1.755 265 290 7.640 370 242 Part Two Designing the Service Ex 4. Brietly state any shortcomings you may perceive in this model 2. What is the expected annual net operating profit before taxes and expected market share for the outlet you have recommended? Defend your recommendation. 3. Try two other values of (eg, 0.5 and 5.0) to measure the sensitivity of customer travel propensity on your recom- mended location. TABLE 8.15 Store Competitors' Store Sizes Sales Area, Sq. Ft. 10,000 15,000 TABLE 8.16 Mas s e Limit of AFI Sites Maximum Sales Area, Sq. Ft. 15,000 20.000 10,000 TABLE 8.17 Minimum Travel Time between Potential and Existing Sites and Black Groups in Minutes 7 Census Black Group Site 1 2 3 4 A 755 91 B 10 8 10 2 3 X 16 14 14 16 Y12 101012 2755 8 5 2 9 7 1 10 10 4 11 14 2 12 17 3 10 13 Operating Data TABLE 8.18 Relationship of size of Store to Margin on Sales, Expenses, and Net Operating Profit as Percent of Sales Net Operating Profit before Taxes Expenses Sales Area, Sq. Ft. 10.000 15,000 20.000 Margin on Sales 162 15.6 123 147