Topic: The following appeared in a memorandum written by the vice president of Nature's Way, a chain of stores selling health

food and other health-related products. "Previous experience has shown that our stores are most profitable in areas wher e residents are highly concerned with leading healthy lives. We should therefore build our next new store in Plainsville, which has many such residents. Plainsville merchants report that sa les of running shoes and exercise clothing are at all-time highs. The local health club, which nearly closed five years ago due to lack of business, has more members than ever, and the weig ht training and aerobics classes are always full. We can even anticipate a new generation of cus tomers: Plainsville's schoolchildren are required to participate in a 'fitness for life' program, which emphasizes the benefits of regular exercise at an early age."

The issue is that of establishing stores so that the profit earned is maximised. Now, before establishing any kind of business activity in an area certain key points have to be kept in mind. The author of the article has successfully kept most of these points in mind and thus the argument are sound. One of the most important aspect about business establishment is "customer base" . If there are no customers to buy your product, there is absolutely no sense of starting up a bus iness. In an area like Plainsville, where the health awareness has sky rocketed, it makes sen se to start up a health store. An example of a bad business strategy would be if the McDonald's chain of restaurants start up in Plainsville. So this point has been carefully kept in mi nd by the vice president. Another very essential point is that of the general trend. Every new idea goes t hrough a process of what is known as "diminishing marginal returns". That is, first the returns i ncrease at an increasing rate. Then it increases at a decreasing rate. It then becomes constan t and starts declining. Now, depending on the stage at which the trend in Plainsville is, the decision of opening up a health store can be considered successful/unsuccessful. However, tr ends like health awareness are different from trends like "fashion". So as a matter of fac t, there is absolutely no risk from the point of view of "interest in public". This point ha s also been carefully taken care of.

The third important aspect is "experience". Relying on experience is very essent ial in making any kind of corporate decisions. Most of the error possibilities are taken care of, when you encounter a similar situation later. Thus, the vice president has also confirmed the correctness of his decision from the past experience. However, there may be certain points which could also have been considered. One important point is the competition. As is mentioned, several local merchants have already establ ished their markets in Plainsville. So, it would be quite difficult for a new product to est ablish itself in Plainsville. There may also be losses, because of lack of familiarity with th e product. People will not try something new especially if it is concerned with their health. So, in that respect the company has to carefully design its strategies. Moreover, the vice president has been very smart in pointing out the new range o f customers. It would be great if they establish their brand equity, by laying stress on "child health". In this way, they would not only get an entrance into the market, but will also find a w ay to extend their products to the general people. The arguments present in this article are quite robust and correct. However, som e other side issues should not be ignored if proper functioning of the strategy is desired.