[music] >> Very well. So, this week, we have actually finished
the first part of firm theory, now we, we, I guess we're going to do three weeks on
it, but the first of the two big parts we're going to start this week and we're
going to finish next week. Now, in order to give you like kind of a
conclusion to this week, and which will be kind of introduction to next week, I want
you to hear from Mike as to one of the issues he'd be having, recently
particularly a good issue because he's had so much success in his business.
So, let's hear what, what the issue is, and then let's come back here and see how
that, it relates to what we did this, this week and what we're going to do next week.
>> Because of the situation we're in, which is that we own the building and we
have a zero lot line on the building, we can't expand this building at all unless
the property owners next door to us are willing to sell.
We never thought that property would change hands, but it did change hands from
somebody that never sells to somehow they sold the property to somebody that is
apparently not going to sell either. So, we're looking at a situation where we
need to open a second location and that would give us more space.
Our kitchen isn't set up well in the back for what, the amount that we have to do.
So, one of the biggest things is that we need to set up a kitchen that's a little
better than the one we have. And then also, more seats for the
customers would be nice. And we'd also like to do an outdoor area.
And we see people coming up and walk, walking up to the door looking at the
line, and walking away every day. And we have a line every day.
So we also think that in Champaign, there's a little bit more, more of a
market for us. We'd probably have more people coming to
us if we had the right location in Champaign.
>> Very well. So, you see that one of the difficult
issues that Mike has to deal with them, it's a good issue, is that he's been
having so much success that he's considering whether to expand, right, and
he's looking for places and he's trying to figure out how that would be a good thing,
and, and so much and so forth. Now, can we answer that question with just
what we said? Well, we can answer part of that.
Now, we know that the reason he wants to expand, is because he's running out of
space in the kitchen, because he's run into that diminishing marginal return
problem of having too many cooks in the kitchen, that any business will run into
when you actually try, in, continue to increase your operation when some, when
some got some fix. So, we understood, we understand that now
after we're done this week. We also understand, after talking about
cost this week, that since we've run into that diminishing marginal return problem,
his, if, he, he would like, like to add another cook, but that cook would add his
cost dramatically so it doesn't make sense for him to add that cook.
We understand the problem of having a fixed kitchen to your cost.
What we're going to talk about next week is the other side of the equation.
So, Mike needs to know also how much he charge and, and what is the revenue he
makes in order to decide whether to expand or not.
And how do they make decisions about how to expand?
You see, what is the criteria he uses as to whether he should build more space for
his kitchen or not. It's not only cost, it also has to do with
customers and how many customers he would be able to sell, and how much he's going
to charge for his product, and what type of product he has in relation to his
competitors. So, those are the questions we still we
have to answer in order to, to answer Mike's, Mike's question.
And in particularly, what does Mike's wants to do, right?
Is, is he want to just does he care about other things, that just the bottom line,
right? So, we have to answer those questions
before we can actually advise Mike as to what to do or to whether he should expand
his business or not. So, next week, we'll talk about the other
side of the equation which is the revenue side.
And then, we put the revenue with the costs together to understand how, how
companies make profit decisions. That's what we'll do, next week, we'll
continue to use the same example, and then, hopefully, at that time, you're in a
better position to advise not only Mike, yourself or anyone doing, business or
being a manager of a company. [music] Produced by OCE, Atlas Digital
Media at the University of Illinois, Urbana-Champaign.
Dr. José J. Vázquez-CognetClinical Professor
