Suppose that after you graduate with a business degree, you take a job as a manager of a local bookstore. You have been hired to expand the business and you recognize that there are many competitors in the bookstore industry. Your competitors enable customers to purchase books on-line at competitive prices. You are faced with a choice of either setting up an on-line website where your customers can order directly from you or opening up a new store where customers can come in, browse the shelves, and purchase what they require. Assume that you expect that net sales will remain the same despite the choice of alternative. Your objective is to maximize profit.

Instructions

(a) Consider both alternatives. Which alternative do you think would present a higher gross profit margin?

(b) Consider both alternatives. Which alternative do you think would present a higher profit margin?

(c) What other considerations would you have to take into account before proceeding with one of these two alternatives?