Case Description

Retail Inc.
CASE COMPANY DESCRIPTION
Welcome to my Retail Inc Empire!
I would like to formally welcome you to the management role of my Retail Inc-Stores. I have chosen you
to take control of the company based on your experience, intelligence, and potential for managerial
excellence. The previous manager, Mr. McMillan, decided that the role was no longer what he was
looking for. To be honest, I was quite sad to see him go.

Now that you are on board however, I am charging you with the responsibility of establishing a new
direction and strategy for the company. The convenience store space is getting increasingly competitive
with the entrance of some big players, and now more than ever we need to be SMART. I believe that
due to your previous experience in the industry you will be perfect in leading my operation into the future.

I am going to be watching and monitoring your performance closely. If you are successful in managing
the sites compared to your competitors, you will be awarded the role of management team. If your
results are not favourable however, I will be replacing you immediately.

In brief, I am looking for the management team which can generate the highest profits in the forthcoming
quarters by optimising the two current sites as well as making a strategic decision regarding opening a
third store. Your team has the total control of all facets of the operation from pricing policies, staffing,
marketing, changing shelf items and customer service issues and so forth.

I have enclosed information of the company background, as well as some information on the current and
potential convenient store plus the latest market research report which should help you in planning your
team’s next move.

I wish you much success in this endeavour and look forward to reviewing your progress.

Mrs. Costalotta
Retail Inc owner and entrepreneur

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Retail Inc.
CASE COMPANY DESCRIPTION

A BRIEF OVERVIEW
There are currently two convenience stores in your portfolio; and both are full service fuel sites. During
your period of management, an opportunity will arise to develop another store (Store C). This site does
not include fuel.

SITE A

Approx. Retail Sales Space: 300 m2

LOGISTICS
Large impressive site with relatively new fixtures and fittings. It has a food service area with a café type
environment, including in-store seating. Site A is also equipped with a maximum number of fuel pumps,
an ATM and a car wash. It is in a good demographic area, situated on a major arterial highway catching
commuting traffic going home from work. It is in a relatively affluent suburb with the local population
representing mostly professional families. There are four private schools in the area. Distribution of
customers is around 75% transient and 25% residential.

STRATEGIES MOVING FORWARD

While Store A continues to satisfy our customers’ needs, we feel that its growth potential is minimal. A
few years ago, we invested funds to redevelop the site to bring it in as a first-class performer. An
opportunity now exists for extra hours of operation. We feel that it will provide with more opportunities to
differentiate the site from the competition. A further investment can be allocated for an in-store upgrade
provided that there is a good business case made for that investment. Though you make the call!

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Retail Inc.
CASE COMPANY DESCRIPTION

SITE B

Approx. Retail Sales Space: 150 m2

LOGISTICS
This is a smaller site. It is a little tired and probably needs refurbishment. Currently there is unused land
for expansion and you have several options for site improvement including refurbishment of the shop,
adding a car wash, putting in a food service area, and adding more pumps. Any or all improvements can
all be done within a 3-month period.

It is in a poorer demographic area than Store A, situated on a minor street catching just some traffic
going both ways to and from work. There is a slight crime problem in the area and the general clientele
are mostly residential with the local population being blue collar workers.

STRATEGIES MOVING FORWARD

Store B is a bit of a dog site. While it continues to survive, its profit growth potential is limited by the lack
of investment that has gone into it. We have not invested funds to update the site for many years. Having
looked at the figures required to update facilities, it is imperative for you, the new management team, to
make a solid business case for any such expenditure.

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Retail Inc.
CASE COMPANY DESCRIPTION

SITE C

Shop shell under new apartment and office block, approx. size 200m 2

LOGISTICS
The potential for this shop is interesting. If you exercise the option to take out the lease, you would then
make the investment to get the site operational. It would take 3 months to both get council approval and
for the total fit-out. The store is in a relatively densely populated area, close to the railway station, major
regional centre and zoned by council as high rise. It is expected that the shop would attract more
residential customers than transit clients with about 60% / 40% ratio.

STRATEGIES MOVING FORWARD

Late last year, we also explored the possibility of expanding our sites to include this non-fuel site. We
feel that as we already have a solid reputation in this region and, with proper marketing, can capitalize
here on our local successes. Also, by opening a third site, we would gain additional volume discounts
from suppliers that are not available to us with only two sites. Our research to date indicates that a third
site holds significant profit potential for Retail Inc’s operations.

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Retail Inc.
CASE COMPANY DESCRIPTION

OVERALL
During your time as the managing team, we anticipate you will act on some, many, or all of these
opportunities in order to create value for the business. Undoubtedly, it will be a time of change for us,
however, we feel that the end result will be a company that is more responsive to customers’ needs and
the industry in general. In short, we anticipate that our sites will emerge as the regional leader in the
supply of convenience store services to the community.

FURTHER BACKGROUND
Retail Inc has been in the industry for over 20 years. It has been operating Store A and Store B for 12
and 10 years respectively. Both sites have undergone many changes since and the old manager
McMillan, was reported to be a good operator but not very big on customer service. The last three years
under McMillan has seen slowly dwindling consolidated profits with Store A being the better performer.

Although the growth rate in the industry has been positive over the past few years, Retail Inc’s
convenience stores were not able to generate the profit levels in the last year that were anticipated.
There were possibly two principal reasons for our reduced profitability this year.

• First, the sales forecast that were developed in the last year called for Store B refurbishment.
Because the forecasts for store sales were slightly optimistic, our lack of investment in major
equipment and facilities helped drive our customer base down at a greater rate than expected.
This reduced our turnover to well below our anticipated level. Fortunately, this is a great chance
to turn this problem into a future opportunity provided we can get growth back into the store by
investing into enhancements.
• Second, in an effort to make more profit, McMillan hired more people. Unfortunately, he did not
put any special efforts in the marketing area. While it is a little unclear as to the direct impact of
low visibility from a marketing point of view, it appears that fierce competition from neighbourhood
sites hurt us as they gained increased traffic flow with some interesting marketing efforts. Hiring
more people turned out to be a very costly decision, since it was not aligned with other decision
areas and generated more costs than additional revenues.

OPERATING ENVIRONMENT
Each competing management team has a convenience store situated with exactly the same location
variables. You will be in direct competition with the other teams within each location and vice versa
different locations don’t compete with each other.

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Retail Inc.
CASE COMPANY DESCRIPTION
MARKET RESEARCH REPORT
Prior to his departure McMillan had contracted marketing agency for a market research study on
customer preference for each of the products sold in the C-Stores. Unfortunately, his tenure ended
abruptly, but here is the information.
CATEGORY EXAMPLES OF ITEMS
Tobacco Cigarettes, tobacco
Confectionery Chocolates, sweets, health bars
Beverage Carbonated beverage, energy
drinks, fruit juices, water,
flavoured milk
Milk & Bread Fresh milk, bread, dairy case,
fresh fruit & vegetables
Grocery General grocery shelf lines,
cereals, canned foods, dog & cat
food, personal hygiene
Snack foods & Salty snacks (chips), nuts, ice
Ice Cream creams
General Newspapers & magazines,
Merchandise phone cards, communication
services, general merchandise,
automotive, lubricants
Food Service External & Internal Branded fast
food, pies sausage rolls, chicken
rolls, burgers etc, hot dogs, sand
other, deli service, donuts &
muffins, FCB, hot beverages,
CAFÉ sales
Car Wash
Fuel Pump sales
RESPONSE TO
PREFERENCES
PROMOTION
Customers less price sensitive than fuel Low
customers. They are more concerned with the
number of hours the store is open and are
more influenced by events.
Customers interested in well-advertised High
products and the convenience of long hours.
Service is important along with cleanliness. A
remodelled store will appear cleaner to them.
Customers interested in well-advertised High
products and the convenience of long hours.
Service is important along with cleanliness. A
remodelled store will appear cleaner to them.
Customers usually buy items needed daily Low
without the hassle of long queues.
Cleanliness, freshness, merchandising is very
important.
Items purchased to fill emergency needs. Not Very low
very price sensitive but cleanliness,
merchandising, in-date stock important.
Customers interested in well-advertised Medium
products and the convenience of long hours.
Not particularly price sensitive. Service is
important along with cleanliness. A remodelled
store will appear cleaner to them.
Usually fairly price sensitive but because of Low
convenience they will be influenced by fuel
prices and visits to the store.
Customers less price sensitive than fuel Medium-high
customers. They are more concerned with the
number of hours the store is open and are
more influenced by cleanliness, freshness,
variety and customer service. A remodelled
store will appear cleaner and more appealing
to them.
Customers usually use wash within local area. Medium
Full service, short wait time and price point are
important.
Price is the strongest selling point. Additional Very high
customers are more likely to come into the
store and buy other products from the shop if
they fill up at the pumps.