Read the following caselet and answer questions that follow:

Divya grew up in a business family in Hyderabad. As a Systems engineer she travelled extensively on business deals and later settled in her in-law’s place in Warangal. Once during her visit to Thailand she got to taste some roll over ice cream. Interestingly, a few weeks later, she came across an advertisement from a reputed Bangalore based Rollover Handcrafted Ice Cream Company calling for expression of interest from potential franchises.

Warangal did not have any quality ice cream parlour. The company wanted the potential franchisees to invest Rs. 20 lacs and 700 square feet space. Profits were to be shared in 3:7 ratio between the company and the franchisee. Divya was excited, but was wondering if Rs. 20 lacs was too much to invest. Further, she did not have the entire amount and was thinking of taking a loan. She enquired with the Rollover franchisees and found that a franchisee in Hyderabad had sales revenue varying between 5 and 6 lacs rupees per month with a profit margin between 25-30%. Divya decided to go ahead.

Warangal had three main areas -Kazipet, Jangaon and Warangal. All areas were linked by good roads. Kazipet was a business area where most high end retail formats were located. It was also the education hub of the city. Jangaon, on the other hand, was a growing lower middle class business area and Warangal was mostly residential.

Divya favoured Kazipet. However, she soon encountered problems. Not only was it difficult to obtain space in Kazipet but property rentals touched 30-40 rupees per square feet per month as against Jangaon and Warangal where it was 15-20 rupees per square feet per month. Divya’s friend, who lived in Jangaon, told her that a few branded outlets were opening in Jangaon and it appeared to be the fastest growing market in Warangal with the highest percentage of teenagers. But, Divya was not in favour of Jangaon. She hoped to target college going crowd of Kazipet. High real estate prices in Kazipet and lower profitability estimate in Jangaon market confused Divya.

Question 45

Which is the most important decision criterion for Divya to consider in such a business situation?


The most crucial criterion for Divya would be a steady increase in business as she has to take a huge loan and invest money in the shop's infrastructure.

Options A, C and D, can be dismissed as they do not relate to the above point.

Among B and E, B is more important, as a consistent increase in the number of customers will make sure that the business flourishes.

Hence, the answer is option B.

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