What is kay? These are data that given us.

ATHOL FURNITURE, INC. 10 CASE 8.2 TABLE 8.15 Competitors' Store Sizes 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 sites and the center of each census block group. These travel times can be found in Table 8.17 Store Sales Area, Sq. Ft. 10,000 A Athol Furniture, Inc. (AFI), is a growing regional chain of discount 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 B 15.000 From experience with other AFI locations, Mr. Gutierrez has developed a fairly accurate portrayal of the relationship between store size (ie., sales area) and margin on sales, expenses, and net operating profit before taxes. This information is shown in Table 8.18 TABLE 8.16 Maximum Size Limit of AFI Sites 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 the company's management. This is because there are existing competitors and several potential sites under consideration Site Maximum Sales Area, Sq. Ft. TABLE 8.17 Minimum Travel Time between Potential and Existing Sites and Block Groups in Minutes X 15.000 Y 20.000 Census Block Group Site 10,000 Z 1 Figure 8.10 is a map of Bluff Lake showing major streets and highways, the railway (AFI will ship its merchandise into the city by rail from a regional warehouse 800 miles away). Crystal River, Bluff Loke, and the census block groups (numbered 1 through 12). Table 8.14 gives the number of households, average annual income per household, and overage annual furniture/large-appliance expenditure per household for each census A 7 block group B 10 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 sites and the center of each census block group. These travel times can be found in Table 8.17 2 3 4 5 6 7 8 9 10 11 12 5 5 9 1 3 4 5 7 10 14 17 8 8 10 7 3 3 2 1 4 2 5 14 14 16 13 8 7 6 4 3 2 2 10 10 12 9 5 4 3 2 4 X 16 Y 12 3 2 Z From experience with other AFI locations, Mr. Gutierrez has developed a fairly accurate portrayal of the relationship between store size (ie, sales area) and margin on sales, expenses, and net operating profit before taxes. This information is shown in Table 8.18 7 5 7 4 2 1 4 3 8 10 13 1 4 State Park TABLE 8.14 Market Data 2 TABLE 8.18 Relationship of Size of Store to Margin on Sales, Expenses, and Net Operating Profit as a Percent of Sales Avg. Annual Furniture/Large-Appliance Census Block Group Number of Households Avg. Annual Income Expenditures per Household Operating Data Sales Area, Sq. Ft. Margin on Sales Expenses Net Operating Profit before Taxes 10,000 162 123 3.9 1 730 65,000-70,000 $180 5 Z Bluff Lake 6 1,130 45,000-50,000 125 1,035 3 80,000-85.000 15.6 15,000 12.0 280 3.6 635 150,000-over 350 20.000 14.7 11.8 2.9 8 5 160 25,000-30,000 75 6 105 20,000-25.000 50 7 125 20,000-25.000 60 HI+ Railroad Freeway Major street - Park boundary River 4 Census block group Existing retail outlets Potential sites 10 11 12 8 470 40.000-45,000 115 9 30,000-35,000 90 305 1,755 10 85,000-90,000 265 11 900 75,000-80,000 215 1. Utilizing a spreadsheet version of the Huff location model (with lambda = 1.0), recommend a store size and location for AFI. Assuming that AFI 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 maximum allowable sales area for each potential site. 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 l (e.g., 0.5 and 5.0) to measure the sensitivity of customer travel propensity on your recommended location. 4. Briefly state any shortcomings you may perceive in this model. 12 150.000-over 370 290 7,640