Key idea: This is a sustainability and cost-structure question. Sundaram's core problem is high fixed cost (rent) relative to stagnant revenue in a captive but price-sensitive market.
Step 1: Analyze the Profit Equation.
Profit = Revenue - Costs.
Costs = Fixed (Rent) + Variable (Goods).
Sundaram is barely breaking even. Rent is increasing every 3 years. Revenue is stagnant because residents go to town for big purchases.
Step 2: Evaluate Option B (Advertising).
Advertising increases awareness, but the bottleneck isn't awareness; it's price competitiveness and convenience for large items. Leaflets won't change the fact that branded chains in town offer deeper discounts. It adds cost without guaranteed revenue lift.
Step 3: Evaluate Option C (Remove Discounts).
Sundaram already committed to a 15% discount to win the contract. Removing it would breach goodwill and likely drive even the "daily essentials" customers to the town stores or online alternatives. It reduces volume, worsening the break-even situation.
Step 4: Evaluate Option D (Procure on Demand).
This is a service improvement, but it doesn't address the core profitability issue. It adds logistical complexity and cost. It might increase satisfaction but not necessarily margin enough to offset the rising rent.
Step 5: Evaluate Option E (Cheap Wednesdays).
Deep discounts (40%) on one day might spike volume, but Sundaram is already struggling with margins. Selling at a loss or near-cost on Wednesdays hurts overall profitability unless it leads to significant cross-selling, which is unlikely for groceries. It’s a short-term tactic, not a sustainable strategy.
Step 6: Evaluate Option A (Negotiate Rent).
The root cause of the distress is the "very high rent" agreed upon during bidding. Since the contract has a review clause every 3 years, and Sundaram is struggling to survive (which is bad for the RA too, as they need a functional store), renegotiating the fixed cost is the most direct way to improve sustainability. It addresses the structural imbalance.
Answer: Option A is the most sustainable way to address the root cause of low profits.