# MEQA Assignment 2 Harvard Case Solution & Analysis

## MEQA Assignment 2 Case Solution

Optimal size of the shopping center

By analyzing the case it was identified that the demand curve proposed by Bob in the estimation of the relationship between retailer and the size of the shopping centre shows a relationship where the retail price increases as the size of the shopping centre decreases. A sample of the proposed estimates is given in exhibit 1.

Exhibit 1 shows the relation between the size of the shopping centre and its effect on the retail price where the demand curve is (r =50 – 0.001s) as proposed by Bob. On the other hand, Exhibit 2also shows the same relationship with demand curve (r = 60 – 0.001s).

By evaluating exhibit 2, it can be seen that the increase in retail price in scenario #2 is more than the increase in retail price of scenario #1, where scenario #1 has retail price ratio of 0.1% whereas, Scenario #2 has 0.14%, which is relatively higher as far as the optimum size of the shopping centre is concerned. Furthermore, if the size of shopping centre is kept at 50000 Sq. meter, then the retail price would become zero in scenario #1 whereas, the retail price would become zero at 60000 Sq. meters in Scenario #2. Hence, it is concluded that if Meckena Enterprises leases a parcel land, then it should keep the size of shopping less than 50000 SQ. meters as the extra 10000 Sq. meters is not profitable to use. Moreover, if the demand curve is used with respect to scenario #1 and is less than 60000 Sq. meters then there would be no excess land with respect to the demand curve of scenario #2, since the less the size, the more the retail price increases.

Amount estimated for lease of land

After analyzing the case, it is determined that the amount that Meckena Enterprises pays for the lease of the land depends on the potential size of the shopping centre which Meckena has planned to build. It can be seen in the table exhibit 2 that as the size increases, the cost of building and the cost of maintenance of the shopping centre also increase, resulting in the revenue to decrease for around 20 years life of the shopping mall. Hence, the cost to be paid for the lease should be considered after estimating the size of the shopping centre which Meckena Enterprises has planned to build. After the size has been determined, the cost of the lease should not be more than the profit under the size determined by Meckena as illustrated in exhibit 3.

Exhibit 3 shows the potential profit where the demand curve is (r = 50 – 0.001s). On the other hand, exhibit 4 illustrates the profitability where the demand curve is (r = 60 – 0.001s), which shows that the cost will remain the same under both scenarios, whereas the revenue is higher in scenario #2 since the retail price is higher, which indicates that if the demand curve of the second scenario is considered, then Meckena would have more cash flows.

Profitability

As illustrated in exhibits 3 and 4, the profit under different sizes is calculated which shows that the profitability decreases as the size of the shopping centre increases in scenario 1 and 2. The decrease in the profitability in scenario #2 is lesser then the decrease in the profitability of scenario #1 as the retail price is higher in scenario #2 than in Scenario #1.........................

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