Question 4: Business Decision

Riverbend Grocers: building delivery or partnering

Units 2, 3 and 4
8 points
About 40 minutes

You can use a calculator on this question, just like on exam day.

A long case about a business choosing between two options, with financial and nonfinancial details: you describe a factor affecting the business, compare the options using financial and nonfinancial criteria, and recommend one, backed by three criteria and evidence from the case. On the exam: Question 4 of 4, Section IIB (Questions 2–4 share 65 minutes); about 40 minutes including a 15-minute reading period, 15% of the score. Assesses Skill Category 3. Section II has 4 free-response questions in 90 minutes (40% of the score). The exam is fully digital in Bluebook, and only a 4-function calculator is allowed (handheld or the built-in Desmos 4-function calculator).

The question and its sources

You have been hired as a consultant to help the business described below choose between two courses of action. Read the whole scenario before you start writing. Respond to parts A, B, and C.

Background

Riverbend Grocers is a family-owned chain of 12 supermarkets that has served its region since 1974. It's known for fresh local produce and friendly service, and it scores 4.5 out of 5 on customer satisfaction surveys. About 60% of its shoppers belong to its rewards program, which tells Riverbend what each member buys.

Last year FreshCart, a national grocery chain, opened stores in the region and began offering same-day delivery. Since then, Riverbend's sales have fallen 4%. A regional business report found that the share of households that order groceries online at least once a month rose from 22% to 35% over the past three years.

Riverbend doesn't offer online ordering. Its managers want to add it, and they have narrowed the choice to two courses of action. Riverbend has $500,000 in cash available for the project.

Source: Hypothetical scenario written for this practice question

Option 1: Riverbend Direct

Riverbend would build its own app and website, buy 10 refrigerated delivery vans, and hire 25 shoppers and drivers. Launch would take 12 months. Riverbend would set its own delivery fees, keep full control of how orders are picked and delivered, and keep all customer data, including linking online orders to its rewards program.

Source: Hypothetical scenario written for this practice question

Option 2: DashBasket Partnership

Riverbend would list its stores on DashBasket, a popular delivery app. DashBasket's own shoppers and drivers would fill and deliver orders. DashBasket charges an 18% commission on each order and sets delivery fees. Launch would take 2 months. DashBasket also lists FreshCart and other grocers, and customers' accounts and order data belong to DashBasket.

Source: Hypothetical scenario written for this practice question

Table 1. Projected financial effects of each option

Item	Option 1: Riverbend Direct	Option 2: DashBasket Partnership
One-time cost	$1,600,000	$120,000
Added annual revenue	$4,000,000	$3,000,000
Added annual operating profit	$320,000	$60,000
Outside funding needed	$1,100,000	$0
Months until launch	12	2

Source: Hypothetical data written for this practice question

Suggested time: 40 minutes

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Part (A(i))

1 point

Businesses are shaped by internal factors, market factors and external factors. Describe one internal, market or external factor in the scenario that affects Riverbend.

Your answer to part (A(i))

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Part (A(ii))

1 point

Explain how the factor you described in part A(i) creates an opportunity or a problem for Riverbend.

Your answer to part (A(ii))

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Part (B(i))

1 point

Compare the two courses of action using projected annual return on investment (ROI) as the criterion. Describe a difference or similarity between them, and include specific evidence related to each course of action.

Your answer to part (B(i))

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Part (B(ii))

1 point

Compare the two courses of action using one other financial criterion. Describe a difference or similarity between them, and include specific evidence related to each course of action.

Your answer to part (B(ii))

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Part (B(iii))

1 point

Compare the two courses of action using one nonfinancial criterion. Describe a difference or similarity between them, and include specific evidence related to each course of action.

Your answer to part (B(iii))

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Part (C)

3 points

Recommend a course of action for Riverbend. In your response, do the following: recommend one of the two courses of action in the scenario; explain why you recommend it; and support your recommendation with any three specific criteria, financial or nonfinancial (they may include the criteria from part B), with evidence from the scenario for each criterion.

Your answer to part (C)

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