44. The following is part of a business plan created by the management of the Megamart grocery store. “Our total sales have increased this year by 20 percent since we added a pharmacy section to our grocery store. Clearly, the customer’s main concern is the convenience afforded by one-stop shopping. The surest way to increase our profits over the next couple of years, therefore, is to add a clothing department along with an automotive supplies and repair shop. We should also plan to continue adding new departments and services, such as a restaurant and a garden shop, in subsequent years. Being the only store in the area that offers such a range of services will give us a competitive advantage over other local stores.”
The author of the business plan claims that the pharmacy section has increased the Megamart grocery`s sale. And the arguer believes that if the company continues to add new department to its store, the sale will continue to rise and the company will gain more competitiveness through the addition of those department. But the author did not notice that there are some faults in his theory.
First, should the 20 percent increase be contributed to the pharmacy section. More specific information is needed to assess the contribution made by the additional apartment. There are several reasons that can increase the sales of Megamart grocery store such as increased economic environment, increased population in the area that the store stands and increased wage level throughout the whole nation. The information provided by the claimer is insufficient to prove that the new section really increased the total sales of the store.
Second, the author has miss understood the meaning of competitive advantages. Multiplying the business is surely one way to gain competitive advantages, but the advanced position of this principle is that the company newly entered the field can compete with the companies that have already entered the business for several years. If the store entered the clothing, restaurant, automotive supply and garden shop business without sufficient preparation or experience, the profit would decline sharply instead of increasing.
Nevertheless, the author created the plan has a creative mind in expanding the company`s business. He mentioned that the critical rule to win customers in recent years is to provide convenient one-stop services. Megamart grocery store company may gain more profit through adding new department that suits the customers that the company already has and through providing new customers a convenient shopping experience.
To sum up, the author of the business plan failed to provide more information that can link the total increase in sale to the adding of new department. And the claimer faulty conceived that the blinded expansion of the service that may not suit the needs of the customers and that may win the competition between the company and other more matured companies can give the store an advantage over other local stores. But the idea of adding new service department, if the department and service are suitable to the store, is surely a good way to attract new customers as well as the loyal customers.