Taking into account that our store has been in operation for some time, it is logical to consider the next step, which is expansion. Any profit-making entity is established with the sole objective of growth and, thus, a plan to expand its operations and services is vital if the firm is to achieve its objectives. This can be achieved by opening a new store in the neighborhood. The benefits arising out of such a plan include increased revenue and profitability which results from a large customer base, improved service delivery to the customers, better handling of the customers because the physical location of the store will be increased and lastly, provision of additional services to customers will be easy. Moreover, investing in this project will solve some of the setbacks currently being experienced in the store. They include late deliveries and long queues by customers waiting to be attended to. Above all, the project aligns with the mission, vision, and strategy of our store, which aims at improving customer satisfaction, becoming a leading retail store in every community, and achieving yearly sales of $3 million. Therefore, if the firm decides to invest in this project, it is projected that the total profit will increase by a margin of at least 20% as a result of growth and expansion.
Having discussed the benefits of the project, it is also important to look at the cost of the project. If the benefits outweigh the cost, then the firm can proceed with the project and vice versa (cost-profit analysis). The major resources required and costs that will be incurred by the store are summarized in the table below:
From the table above, the overall monthly cost of setting up the new retail store is $22,100. The expenses are not very high and the parent store has enough resources to cater to the project. The research conducted by the parent company revealed that setting up a new retail store in the neighborhood would increase the store’s profit by 20%. Comparing the profit against the costs involved, one can be certain that the return outweighs the expenditure. Thus, it is rational for the parent store to invest in the new project which will take approximately 3-4 months to start its operations.
The major risks involved in this project include the risk of collapse or failure of the business. This might be caused by competition from existing stores. Other risks involved include physical destruction by natural calamities, e.g. floods and destruction of perishable goods due to the reduced product market. This can be resolved through the acquisition of a proper and up-to-date insurance policy.