Business Problem and Recommended Solution

Business Problem and Recommended Solution

Intrigued by the opportunity of owning his business, Larry Brownlow must decide whether a distributorship opportunity with Coors is a worthy venture. To aid Larry with his decision, the following pages provide an assessment of this business opportunity. With a limited research budget of $9,500 (p.143), careful selection of reports was essential to obtain both the necessary data to project profitability (e.g., revenues, cost of sales, other expenses, Coors projected market share, retail pricing data) and to provide a qualitative, consumer-focused perspective that would give these quantitative projections a solid foundation. Considering the given financial background, if Larry does not go forward with this investment, we assume he will choose to continue earning annual income from his trust at $40,000 per year (p.143). However, if he goes forward with the investment, he will cash in entire trust and take a significant financial risk. Therefore, we can reasonably assume that Larry will go forward with this investment as long as he can recover his initial investment and earn a salary that exceeds his current annual income. After calculating the possible financial income and analyzing sensitive variables, we suggest Larry takes this opportunity.

Forecasting Coors’ Potential Market Share

Firstly, to assess potential profitability, we sought to project Coors’ anticipated percent market share for the two-county market to determine the potential consumer base for Larry’s distributorship. From the following calculations, we found that the projected market share is sufficiently large to justify Larry’s investment.

Using consumer survey information, we devised a metric for calculating and projecting Coors market share. While only 300 customers were surveyed (Research Study G), we made an assumption that this sample sufficiently represents the preferences of the greater population in the two-county market area. We also assumed that attitudes toward Coors were equally distributed amongst consumer weekly beer consumption levels. Then, we forecasted Coors market share by multiplying the percentage of people with a certain preference by the Coors purchase percentage for that preference. We projected an anticipated market share range, between 13.7% and 21.5%, illustrated in Exhibit 2. Calculations relied upon customers’ “Attitude Toward Coors” because we felt this measure was more indicative of regular purchasing frequency than simply an “Intention to Buy Coors”.

Additionally, South Delaware beer consumers consume on average less per capita than the state as a whole, so there may be room to increase consumption among those who are light drinkers.