New River Apparel: Trot or Gallop?

Abstract

Marjorie Burnett, who runs a clothing outlet with lagging revenues in Tennessee, is considering taking a gamble on starting a new business. She has to decide whether expansion—offering even more products—is the answer to increasing her revenue, and whether would that decision be more profitable than her present business, given that the storefront she's considering is in a relatively unpopulated rural area. Would a new business be worth the investment, or should she stick with the business—and the risks—she already knows? Excerpt UVA-ENT-0194 Rev. Aug. 8, 2019 New River Apparel: Trot or Gallop? Introduction Marjorie Burnett sat in her office in Chattanooga, Tennessee, deeply in thought. In a few months, she would no longer be here—she had decided to move her business to Monteagle, a relatively unpopulated location in rural Tennessee. The big question was how to do so: she could either keep the same store format with some product adjustments to fit the new location, or take the gamble to massively expand and change the business model. Was expansion—offering even more products—the answer to increasing revenue, and would that decision be more profitable than her present business? The biggest risk was whether a new store, in a relatively unpopulated location in rural Tennessee, could sell merchandise steadily enough to sustain itself while Burnett figured out how to manage a business related to—yet very different from—her current one. The move would mean a transition from high-end clothing outlet to outdoor outfitter. Burnett even had a potential name change in mind: New River Apparel would become Mountain Outfitters. . . .