In a city, there are three trading areas and three Oil marketing companies namely IOC, BPC and

HPC. All three oil companies are considering, setting up of new retail outlet(s) (ROs) in the city.
The relevant details are given below:

Before setting up new Ros After setting up new Ros

Total sales of all No of existing Ros Cost of Estimated sales of
existing ROs in setting up all ROs in TA after
TA (KL/month) new RO 1 year with
in TA (Rs addition of
Trading
Lac) one/more new ROs
Area
(TA) MS HSD IOC BPC HPC
A 900 360 4 2 0 300 980 490
B 100 600 2 0 0 160 120 660
C 180 240 1 1 1 120 200 300
Assume sale of all ROs in a trading area (TA) remain unchanged after setting up one or more
than one new RO. For example, MS sales per RO in Trading area “B” before addition of new
RO was 50 KL/month (100 divide by 2) and MS sales after addition of 1 RO will be 40
KL/month (120 divide by 3 and MS sales after adding 2 new ROs will be 30 KL/month
(120/4) and so on. This also hold good for HSD sales). Assume maximum budget allocation
under retail business head (including setting up of new ROs in the city) by IOC, BPC and
HPC is Rs 450 Lac, Rs 300 Lac and Rs 500 Lac respectively. Assume that all above data is
readily available in public domain i.e. all the three oil companies are familiar. Estimated sales
of all ROs in TA after setting up new ROs mentioned in last column is given after one year
period and time required for constructing and setting up new RO(s) is also one year. All oil
marketing companies want to spend their retail business budget judiciously so as to
maximize the returns on the money spend. Based on the above information, answer the
following questions:

(a) What is average combined per pump throughput in trading area “C” after setting up 2
new ROs?

(b) How many options are available with IOC and BPC for setting up one or more than one
new ROs in each of the three trading areas?

(c) What would be your advice to IOC for setting up one or more than one new ROs in three
trading areas, if you act as consultant for IOC only? Justify your proposed advice.

(d) What would be your advice to BPC for setting up one or more than one new ROs in three
trading areas, if you act as consultant for BPC only? Justify your proposed advice.