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Medium Market Expansion

Pat's Pottery Studio

#Leisure #Retail Operations
ProHub Comment

This is a market expansion case requiring candidates to evaluate three neighborhood locations based on demand modeling, financial analysis, and operational capacity constraints. The case tests ability to synthesize demographic data with profit calculations, and critically to identify that kiln capacity is the binding constraint that can reverse the initial recommendation. Strong candidates will discover that while Dilettante Heights shows higher raw profit, capacity limitations make Clayton Creek more attractive unless kiln operations can be scaled.

Estimated Time 15 minutes
Difficulty Medium
Source Cornell
50 / 100

Your client Pat Potter is the owner of a chain of popular pottery studios which are located in small towns across the northeast United States. Pat is interested in expanding into Mountton, a town in upstate New York. After a call with a local real estate agent, Pat found three possible locations – one in each of Mountton’s three neighborhoods.

Which of the three locations should Pat choose?

Clarifying Information

  1. Having opened several pottery studios already, Pat understands that it takes a while for a new business to find its footing. Pat is looking to maximize the expected monthly profit once the business reaches a steady state.
  2. Students pay $30 per class attended. Pat has no interest in a subscription model.
  3. Some neighborhoods have existing pottery studios. Without further information, we can assume that Pat’s will be equally as popular as the other studios once it reaches a steady state.
  4. People in one neighborhood do not usually visit the other neighborhoods. We can dive deeper into each individual neighborhood later in the case.
  5. A teacher guides a class of up to 30 students through making a pot or other item. At the end of class, the items are placed in the studio’s two kilns and left to fire for 8 hours. There are two classes a day, 30 days a month (even in February).