To what extent would it be beneficial for Company XYZ to open a new store in one of Lima Top’s districts to gain a greater customer base?

Company XYZ is a Peruvian private limited company offering a wide selection of national and foreign household and kitchenware products. Its mission is to provide every customer with quality and innovative products to equip their kitchens and dining tables. However, according to its Head of Institutional Sales, a significant portion of its sales are digital due to limited store proximity to some customers, not allowing it to efficiently showcase its full product portfolio. Hence, it is considering opening a store in a new location to also help it increase its customer base.

During the process, certain initially considered business tools such as Porter’s Generic Strategies were eliminated due to word count limitations, and after finding others more effective in addressing the research question. Furthermore, additional secondary research during the report writing was conducted to explore the benefits of Lima Top more comprehensively.

I would like to thank Individual X, and Individual Y for their contributions and cooperation in making this investigation on Company XYZ a reality. Specifically, I express my gratitude towards them for providing me with financial documents and their time to interview them.

Moreover, I would also like to thank my IB Business Management teacher for all the guidance and feedback throughout the process of writing this assessment.

Company XYZ (XYZ) is a private limited company based in Lima, Peru, offering a wide range of household and kitchenware products. Due to the distant locations of its two Downtown Lima stores, XYZ heavily relies on its e-commerce platform, limiting its capacity to showcase its complete product range. Thus, this study aims to evaluate the potential benefits for XYZ of opening a new store in Lima Top.

Tools such as the Ansoff Matrix, SWOT & STEEPLE analysis, and financial ratios were utilized to achieve a holistic perspective on the decision. Primary research, specifically interviews with two key company executives, formed the core of the investigation. This was supplemented with secondary research, including financial statements and research on Lima Top.

The findings of this exploration revealed that the expansion in Lima Top would be beneficial to a great extent if the company’s strengths and opportunities are exploited, and a more careful approach towards Market Development is implemented. The proposed location and XYZ’s financial performance also provide a strong foundation for this project. However, limited investment cost and return information hindered precise analysis. Thus, the company should collect this data in the future to ensure the viability of this expansion.

Company XYZ (XYZ), established by Individual Z in 1971 in Lima, Peru, is a private limited company with over 50 years of experience commercializing national and foreign kitchenware and household goods. It primarily serves the HORECA sector, supplying mainly wholesalers but also retail stores.

The company's current focus is on maintaining its industry leadership, enhancing customer loyalty, and sustaining profitability. Moreover, it wants to continue to ensure that all its customers can find the ideal products for their kitchens and dining tables.

However, the lack of proximity of both of its stores in Downtown Lima to some of its customers has required XYZ to depend on its e-commerce platform, limiting its ability to showcase its full portfolio and allowing competitors to gain a competitive edge.

Hence, the company’s determination not to fall behind has led to the research question: “To what extent would it be beneficial for Company XYZ to open a new store in one of Lima Top’s districts to gain a greater customer base?”

This investigation relied on primary research through two 30-minute interviews with key executives: a member of the Board of Directors and the Head of Institutional Sales. This was valuable in gathering specialized information relevant to the research question from different perspectives. However, potential bias may have occurred.

Secondary data supported the investigation, including XYZ's 2022 financial statement and annual report for assessing the company's financial status. Nonetheless, non-financial factors were not included, providing an incomplete view. Hence, the company’s website was also used, though it offered limited information, reinforcing the need for interviews. Additionally, online research about the proposed location was performed, but it provided general insights potentially not applicable to XYZ.

For theory and tools, Paul Hoang’s IB Business and Management 4th Edition textbook, specifically Unit 1 (Business Organization and Environment), was used to ensure accuracy. An Ansoff Matrix was utilized to evaluate previous expansion efforts, providing useful insights for the decision. However, its limitation was not considering any current factors. Thus, a SWOT and STEEPLE analysis were applied to thoroughly evaluate XYZ’s current strengths and weaknesses and the external environment’s opportunities and threats that could also impact on its new store. However, this analysis was limited to using potentially outdated information. A financial analysis, using ratios such as gross and net profit margins, and return on capital employed, was also carried out to assess the company's financial health comprehensively.

Analyzing Company XYZ’s previous growth strategies was vital for an informed decision about expanding in Lima Top, as these provided insights into past outcomes. Thus, these have been categorized depending on their risk in Figure 6’s Ansoff Matrix.

This analysis has highlighted XYZ’s use of diverse growth strategies throughout its journey. While Product Development and Market Penetration have improved sales and customer retention, they have not significantly expanded market reach and brand awareness. Hence, further exploring Market Development by opening a store in “Lima Top” and after more thorough planification compared to the Miraflores showroom could help it to greatly expand its customer base. Without market research and advertising, it might face loyalty challenges, as seen in the past.

Nevertheless, it's crucial to note that this analysis solely relies on historical data and lacks insights into Lima Top's current market dynamics and competition.

An analysis of Lima Top was also conducted to assess its suitability for a new XYZ store. “Lima Top” refers to an area of prosperous districts in Peru’s capital. Specifically, the Surco and San Borja districts are considered excellent options for many local businesses due to their strong market demand and more affordable business premises than other districts in this area, an opportunity XYZ could also exploit. The customer base in this sector consists of high-income residents who seek quality products, aligning perfectly with what XYZ can offer. Furthermore, their strategic location near some of the busiest avenues in the city, namely “Aviación” and “San Luis”, could help the company to draw a larger crowd of potential customers to its new store.

Given these insights, Lima Top emerges as a promising location for a potential XYZ store, offering opportunities to diversify its customer base and expand its market share. Moreover, it would also help minimize the challenge for XYZ of trying to fully exhibit its portfolio digitally to customers distant from their current stores. However, the location would need to be large enough for XYZ to have a warehouse. Also, opening a store in this location would involve higher costs that other alternatives in the city and competition from established brands with loyal customers.

A SWOT Analysis (Figure 7) was conducted to assess Company XYZ’s current strengths and weaknesses. The opportunities and threats it could face in its possible new store were also considered utilizing some STEEPLE factors. This will be useful in making an informed decision on whether opening a new store would be advantageous or if it would bring many challenges.

After this analysis, valuable insights have emerged. Several strengths and opportunities for XYZ have been seen, placing it in a competitive position that could be potentially exploited in a new store. However, although this analysis has demonstrated that it would be beneficial for XYZ to proceed with this decision, it would need to carefully adapt to the distinct customer preferences and expectations to succeed.

It is vital to highlight that this analysis is limited to a brief exploration of each factor and doesn't fully account for the dynamic industry changes, evolving customer preferences, and competitive landscape.

In the evaluation of Company XYZ’s potential opening of a new store, it was also crucial to conduct a financial analysis to evaluate its readiness for such expansion. Therefore, ratios and metrics were used.