Introduction
Nehby Company (Nehby) is a family business which owns and operates eight restaurants in Caputo, the capital city of the country of Ceeland. Caputo is located in the south of the country.

Nehby has been in business for the last 35 years. During that time the company has created some of Caputo’s most iconic and best loved restaurants. The theme of their success is renovating and restoring historic buildings, transforming each one into a beautiful and original restaurant.

The original founder, Graeme Nehby, is also the chief executive officer (CEO) of the business. Graeme has a strong personality and his views have tended to dominate the direction of the business to date. Graeme’s three sons have all joined the family business and together with Graeme form the board of Nehby.

Figure 1 below shows the current reporting structure and ownership of the business.

Figure 1

The Nehby board is considering the future strategic direction and investment plans for the business. The sons have suggested that Nehby should pursue a strategy of product diversification and enter the hotel industry. They have identified a new business opportunity, in the north of Ceeland, to renovate and restore a historic building, formerly a bank, and turn it into a hotel, which will be operated by Nehby. However, Graeme believes that the business should continue with its current business model of converting historic and iconic buildings in the capital city into restaurants and wants Nebhy to open another new restaurant in Caputo.

Graeme and his three sons want to seek advice and guidance about the opportunities available to them. They have commissioned you, as an independent self-employed management consultant, to provide them with information and analysis to support their future expansion plans and advise them about their choice of strategic direction.

You have collected and analysed the following information, exhibits (1–6), to help with your task.

Exhibit 1: Article, on the success of Nehby’s restaurants, published in the Caputo Post newspaper.

Exhibit 2: A transcript of the views of each member of the Nehby board on company performance to date and the future strategic direction of the business.

Exhibit 3: Information on the two investment plans, prepared by John Nehby.

Exhibit 4: Article on the hospitality industry in Ceeland.

Exhibit 5: Nehby Company financial and management accounting information – extracts for the year ended March 20X0.

Exhibit 6: A transcript of an interview shown on ‘Talking Stock’, a Ceeland television programme which looks at business topics.

Question 1:

Nehby Company is now considering whether to continue with the current business model of renovating an historic building and transforming it into a restaurant in Caputo or to diversify the portfolio and enter the hotel industry by converting the former bank, situated in the north of Ceeland, into a hotel. The board of Nehby has requested an independent report on the two mutually exclusive investment options they are considering.

Required:
Prepare a report which assesses and appraises the two options from a strategic perspective. The report should allow the board of Nehby to compare and contrast the two options.

Note: A recommendation is not required. (20 marks)
Professional skills marks are available for demonstrating evaluation in assessing and appraising the information the board of Nehby will need to use to form the basis for their final decision. (4 marks)