BB is a family-owned small business. The firm manufactures bicycles which are supplied to independent retailers. Recently, Lia, the Sales Director, has reported a 20% fall in monthly sales. She has asked the other directors for ideas to increase revenue. The Managing Director, Moneeb, has suggested that BB should open its own retail shop. Moneeb believes that BB has poor inventory management. BB currently uses buffer inventory control methods. There has been a build-up of inventory that is using warehouse space that could be converted to a shop at a cost of $180000. He estimates additional yearly costs of operating the shop of $40000. Moneeb has provided the following information in Table 1.1. Table 1.1: Financial data for selling bicycles through BB's proposed shop | Unit price | Cost of sales per unit | Forecast additional annual sales | | :--------- | :--------------------- | :------------------------------- | | $300 | $120 | 1250 units | John, the Operations Manager, thinks it would be a mistake to open a shop as they have no experience in the retail sector. He thinks that sales could be increased through the existing channel of distribution. John believes that the salaried staff in the sales department are not motivated to find new independent bicycle retailers, as they rely on customers who have bought from BB for many years. Lia thinks that BB should produce a new design of foldable bicycle which would be lightweight and portable. Secondary research shows that this is a growth market with customers prepared to pay a premium price for a well-designed foldable bicycle. Lia estimates that an investment of $225000 would be required but the gross profit margin is forecast at 50% with additional annual revenue of $500000. Moneeb and Lia have been asked to present their proposals for increasing BB's revenue to the other directors, who will then make a decision.