Congratulations! Because of your success as a business person and as a result of
ID: 363756 • Letter: C
Question
Congratulations! Because of your success as a business person and as a result of some wise investments, you have extra capital. Time to open a new business. But there is a problem…you have a lot of ideas and cannot decide which one is the best option to pursue. Time for a factor weighting approach [(a.k.a. decision matrix) lucky that you had this as an MBA student]. After some time you come up with important factors and take the time to rate your potential new ventures on a scale of 1-10. The result is listed in the table below.
a. Which venture do you choose?
b. Going beyond the score, construct a brief rationale for why this choice makes sense.
c. Now disregard the score for a moment. You decide that the best course of action is to move forward with the venture that scored second highest. Make an argument for why this option should be chosen.
Safety Risk
Inflation Risk
Rate of Return
Management Difficulty
Stability
Compatibility with Current Business
Real Estate Rentals
9
7
5
9
9
9
Subway Franchise
5
6
4
3
6
9
Carpet Cleaning Business
3
6
4
3
5
9
Convenience Store
4
4
6
3
6
9
Bookkeeping Service
6
8
6
6
7
9
Business Consultant
9
5
4
6
8
9
Web Designer
7
5
5
6
7
6
Investment advisor
6
7
7
6
5
9
Travel agent
7
7
9
6
7
7
Internet retailer
8
7
9
8
7
8
Weight
4
3
3
2
1.5
1
Safety Risk
Inflation Risk
Rate of Return
Management Difficulty
Stability
Compatibility with Current Business
Real Estate Rentals
9
7
5
9
9
9
Subway Franchise
5
6
4
3
6
9
Carpet Cleaning Business
3
6
4
3
5
9
Convenience Store
4
4
6
3
6
9
Bookkeeping Service
6
8
6
6
7
9
Business Consultant
9
5
4
6
8
9
Web Designer
7
5
5
6
7
6
Investment advisor
6
7
7
6
5
9
Travel agent
7
7
9
6
7
7
Internet retailer
8
7
9
8
7
8
Weight
4
3
3
2
1.5
1
Explanation / Answer
1- I will choose Internet retail because in the decision matrix it has highest points by weighting the risk i.e.8*4+7*3+9*3+8*2+7*1.5+8*1=114.5 which is maximum from the available data.
2-It also make sense that internet retail donot require much bigger business plan and robust investment.Digital penetration is increasing and more people are having internet connection.Business risk is also minimum and rate of return is quite high in this sector.It is also need of the time when more people are becoming tech savvy and smartphones do require internet connections to function properly.All segments of people from students toold people have demand of internet.Robust demand in this sector is also a natural choice.
3-From the list second best option will be real estate rental which have weightage score of 112.5. In real estate rental is sense that stability is more in the business.Initial investment will also not be more and this industry has ever growing demand.Due to more economic growth and trickle down of growth people from small areas are moving to larger cities and industrial hub for search of livelihood.Migration and urganization is increasing and it will increase in the near future also.These people will seek for rental home so industry demand will be more and there are virtual absent of any real estate rental firms.Due to this factor too it is one of the prosporous industry to start a new business.
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