Earth's General Store: Balancing People, Planet, and Profit in Organic-Food Retailing
At the bottom of the first page of the case study, Michael Kalmanovitch concludes that he must come up with a plan to overcome the financial drain his new store in downtown Edmonton has become on his business. Following the lead of the other research projects cited in the case, he uses a local consultant to obtain recommendations on his best alternative for moving forward. The consultant comes back with two recommended alternatives. First, consolidate all his activities at the Whyte Avenue location, or secondly, move from the 104 Avenue to a more accommodative environment if he decides to maintain a second location. The cost of the move is estimated to be $60,000. The projected profits for the two approaches along with associated probabilities for those varied profits are outlined in the accompanying Excel spreadsheet. Provide an evaluation of the data and make a recommendation to Mr. Kalmanovitch on which choice would be best.
Part 1
Only a conceptual outline is expected in each question of Part 1.
1. You should assume the estimated profits and probability values for the two alternatives are accurate. Describe the process you would use to evaluate which alternative would best provide Earth's General Store the opportunity for success in the future. How would the proposed capital cost required for the move to a new location influence your recommendation? Finally, summarize the critical elements you believe Kalmanovitch should consider in making his decision.
2. Are there other factors beyond those in the case that you believe would be useful to know prior to making a decision on which alternative would be better in the long run?
Part 2
Use the information below to conduct this part of the analysis. This data set is only applicable to this section.
1. Given the estimated profit levels and associated probabilities outlined in the data set, determine the expected profit and other calculations that will enable you to complete the analysis you described in Part 1. Show your work.
2. Provide an appropriate narrative of your results, including an explanation of why you believe either consolidation at the Whyte Avenue location or moving to another location to resolve the problems presented by the 104 Street situation would be the best alternative for Earth's General Store's future viability.
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Earth's General Store
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Expected Profits / Status Quo vs Go
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Whyte Ave.
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Move New Location
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Prof (WA) CA$ 000's
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Prob pi
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Profit (NL) CA$ 000's
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Prob pi
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-28
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0.05
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-45
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0.1
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22
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0.15
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33
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0.1
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31
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0.3
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42
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0.2
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45
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0.25
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55
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0.3
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52
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0.25
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62
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0.3
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