Question

Hard Rock café is in the process of choosing a new location for a café outside the United States. Selecting the country and city involves a great deal of research. The company is currently looking into global expansion into Europe, Latin America, the Middle East and Asia. Among factors considered are political risk, currency risk, social norms, and proximity to competitors (clustering). After a complete analysis of various factors, the management has developed the following table of key factors and countries under consideration, where the scores measure risk on scale of 1 to 100, with score 1 for lowest risk and 100 for the highest risk for a factor. Use the factor-rating method, to recommended a new location for Hard Rock Café? South Africa Argentina Egypt U.K. Nigeria Indonesia Key Factor Weight Pretoria Buenos Aires Cairo New Castle Lagos Jakarta 1. Demographics 0.2 90 70 60 90 80 90 2. Visitor market 0.2 80 60 90 75 60 85 3. Transportation 0.2 75 50 75 90 70 70 4. Restaurants/nightclubs 0.1 80 90 65 90 60 60 5. Low political risk 0.1 90 60 50 70 85 85 6. Real estate market 0.1 65 75 85 70 85 90 7. Comparable market analysis 0.1 70 60 65 80 75 80 a. Which is the highest-rated location of the six countries selected for consideration? b. Suppose the visitor market in Cairo, Egypt, improves, reducing the risk score for the visitor market from 90 to 40. Does this change affect your decision in part a?

Answer 1

Using the factor-rating method, we calculate the total risk score for each location by multiplying the key factor scores by their respective weights and summing them. The location with the lowest score is the recommended one. If the visitor market score in Cairo changes, we must recalculate its total risk score to see if it alters the decision.

Step-by-step explanation:

The student has presented a factor-rating method scenario for choosing a new Hard Rock Café location outside the United States, considering various countries and key factors weighted accordingly. To identify the highest-rated location, we multiply the risk scores by the weights for each factor and sum these products for each location. The country with the lowest total score should be recommended as having the lowest overall risk.

For instance, calculating the score for Buenos Aires, Argentina would involve adding (Demographics × 0.2) + (Visitor market × 0.2) + (Transportation × 0.2) + (Restaurants/nightclubs × 0.1) + (Low political risk × 0.1) + (Real estate market × 0.1) and (Comparable market analysis × 0.1), with the respective scores for each factor. Simply replace the scores for Buenos Aires with those of another city to determine its total risk score. Comparing the total scores will reveal the best location.

For the second part of the question, if the visitor market in Cairo improves from a risk score of 90 to 40, we recalibrate the total score for Cairo by adjusting the contribution of the visitor market factor, following the same method as before, and then compare the recalculated score with the previous scores to see if it affects the originally recommended location.