Larry Brownlow, soon to be completing his MBA, heard that Coors would be expanding in two counties of South Delaware. Coors currently does not have any distribution hubs in this or the surrounding areas. Consumers in the area know the Coors brand and see the product as a good tasting and quality product. The consumer interest in the Coors product is high and will provide the demand for the product. Larry has always believed that the best business opportunities and rewards are in smaller owner operated businesses and is interested in the opportunity to invest in one of the Coors distributorships in South Delaware. Larry has $500,000.00 in a trust that will become available in a few months. Larry is very busy completing his MBA and with his family that he is not able to do the proper research for the Coors investment opportunity so he enlisted the help of Manson and Associates. Manson and Associates is based in Wilmington, Delaware and conduct general research; they have conducted other feasibility studies in the South Atlantic region of the country. They are best known for their computer modeling and simulations and they deliver quality work to their customers. Larry has $15,000.00 available to spend on feasibility research, which is not enough to cover all of the proposed research so Larry will have to decide which research items provide him with the right information. The research information will provide Larry with the proper data to decide whether or not he should invest in the Coors opportunity.
Larry Brownlow has been given the opportunity to invest in a new Coors distributorship expansion in South Delaware. In this case there exists two problems that Larry Brownlow must address. The first problem identified in this case is Larry’s limited research budget of $15,000.00. Larry’s research budget is not enough to cover all of the research provided by Manson and Associates. Larry must decide what research will be most beneficial to him for his decision of whether or not to invest in the Coors distributorship opportunity. The second problem is Larry must make a decision on whether or not to invest in the business opportunity of starting a Coors distributorship.
Analysis and Evaluation
Since Larry has a limited research budget of $15,000.00. It is critical that he selects the research that will assist him the most in his decision to invest in the Coors opportunity. The required information to make a well-informed decision will be comprised of the following components: Industry demand, projected market share, consumer acceptance of Coors, required investments, product pricing, costs, and potential profits.
To determine the demand on the beer industry the information from Studies A & B is required to perform a per capita analysis. The cost for these two studies is $2,500.00. The over age 21 population, in Delaware, will be considered for both a per capita consumption along with populations in both Kent and Sussex counties. The demand is computed by multiplying gallons of per capita beer consumption by the population in Kent and Sussex counties. For example, the demand for the year 2000 would be: 39.4 gallons per capita x (75,200 + 85,300) = 6.324 million gallons of beer. In analyzing the data for Studies A & B the data has a continuing growth trend so the demand should increase year over year as well. The industry demand can also be computed by using a tax-based approach. The data from Study E, which costs $200.00, will be required to perform this analysis. Study E only provides tax information for 1997 and 1998 so the tax will have to be projected forward to 2000. The tax increase between 1997 and 1998 is 6.3%. Table 1 shows what the projected taxes are through the year 2000, a 6.3% linear tax increase is assumed. The Beer taxes are based on a volume sold...