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Business Simulation - Assignment Example

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This assignment "Business Simulation" shows that currently, Computer Sales of Birmingham, UK offers limited products for sale, such as personal desktop computers and accessories.  The business currently offers desktop models, of two different brands…
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Business Simulation
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? Currently, Computer Sales of Birmingham, UK offers limited products for sale, such as personal desktop computers and accessories. The business currently offers desktop models only, of two different brands. Being located near Birmingham City University, University of Birmingham and Aston University, most of the Customers Computer Sales currently serves are college students, though occasionally University professors and faculty use the services as well. The few business customers that have utilised the computer sales shop include nearby retailers, such as an antiques shop, a pub and a small cafe. Computer Sales would like to expand its product offering, to include laptops, notebooks and customization options. Computer Repair business averages ?8,900 in gross monthly profits. The owner/manager believes that it can achieve ?12,000 in gross monthly profits, through promotions and expansion of product lines. Currently, the business employs two part time sales staff and one full time book keeper/receptionist. Though the space currently available for formatting new machines is adequate, nearly one third of it is used to store inventory, which includes new product models for resale. With expansion of services and the need to utilise space more efficiently, the business must consider alternative supply chain processes, such as JIT systems. It must also consider the types of products to offer, such as business machines with networking capabilities. Aside from increase monthly gross sales, the business has identified objectives of greatly increasing its individual customer base and greatly increasing the number of business customers, so that dividing the products into separate business units is feasible. A thorough analysis of the business environment will allow the computer sales business to make decisions about expansion that are most suitable and to develop a marketing and promotions programme that aligns with expansion of product lines. In addition, it must determine how management might be restructured, with a new business strategy. The PEST analysis is utilised to determine how environmental influences may affect business expansion and promotions. The table below demonstrates how the various environmental influences may affect the computer repair business. Political Business tax rate remains 21% at projected profit increase, according to Adam & Brown (1999, p.13). Employee vs. Self employment (2 National Insurance taxes for self-employed, affects pool of applicants. Relationship with nearby University critical for technician. Environmental concerns of policymakers and citizens. Consumers want ‘green business’ initiatives. Costs of ‘going green’? Economic Consumers tightening budgets, spending less on new products or choosing more affordable products. Costs for fossil fuels may influence supply costs. Social Social networking for younger users (teens and young adults) may offer an additional channel for promotion. Consumers want value and personal relationship in product sales. Technical Requirements for networking and customization rely on technical knowledge. Use of JIT inventory systems reduces inventory related costs. The SWOT analysis helps the computer sales business determine the type of growth strategy and promotions strategy to be developed, by conducting an honest assessment of the organizations physical and financial assets, its potential capabilities, current shortcomings and potential future challenges. The SWOT analysis table below provides management with greater insights, to develop a successful business strategy. The analysis considers the most important and influential factors in expanding Computer Sales. Strengths Located in business centre of city, exposure can be greatly increased. Relationships with suppliers already established (Dell and Hewlett Packard). Weaknesses Lack of promotions plan, currently relies on word of mouth. Too much physical inventory takes up space and increases costs. No technical expertise for customization. Opportunities Increase awareness through networking and promotions. Expand services for local businesses. Focus on customer satisfaction and top notch service. JIT inventory reduces costs. Threats Competing computer retail sellers ie: campus computer store. Competing computer resellers serving corporations have competitive advantage in well developed, adaptable processes. Costs for fossil fuels affect supply costs. The market for new computer purchase can be divided into larger business and personal categories. Within the business category are small, medium and large businesses. Larger businesses often purchase directly from the manufacturer, especially when they have an well developed IT department, which can be utilised for installation. However, small to medium sized businesses may also require complicated networking systems, depending on the nature of the business. Initially, the expansion into network servers will focus on companies that require local intranets that are not tied into larger systems elsewhere. “If you happen to be a service provider, the only way to stay in favour with your customers is to keep an ear to the ground for signs of discontent and then meaningfully respond as needed,” suggests Lee Badman (2009). The idea is to expand product lines and customization slowly, to achieve optimal customer satisfaction. Personal users will be categorized as gamers, scholars and home personal users, who may keep books, use email, shop or be involved in social networking. Though all categories many use their personal computers for social activities, conducting academic learning activities requires greater storage capacity and often, a focus on the speed, in which files are transferred (uploaded or downloaded). Gamers want capacity, but performance issues, such as sound and graphics quality are also considerations. There is little additional investment required to add gamers as a market segment, as they typically are aware of the types of products offered within each line and can easily identify which machines will suit their needs. For the computer sales business, product design considers the supplies, hardware, software and expertise needed to provide the intended customization. In addition, it considers how products will be deliver to customers. It is expected that a technician will be required for customized machines, where specific software packages or applications are desired. Business services will require an initial consult, to determine requirements, followed by an appointment to actually deliver new products and set them up properly. With JIT inventory management, minimal levels of desktop and laptop computers will be stocked. The most universal products, those that can be used for both personal and scholarly or business activities, will be available for immediate delivery. In addition, the shop’s hours will be extended in the evening, to allow students, professors and other working individuals, the ability to discuss computing needs and to pick up machines ordered. To make use of additional space, the computer repair business will select a suitable JIT inventory management system that is compatible with chosen suppliers, to greatly reduce stock levels. Currently, there is one work station, with the ability to add at least one more. The additional space gained by reducing inventory will also be available, for the installation of customized software packages loaded onto new machines. In terms of staffs, the computer repair will need to hire one technician and Increase the hours of one sales person, to a full time, 40 hours per week schedule. One of the part time sales staff will remain. A college apprentice will work part time, floating between the two business units, assisting the technician with installation of software packages and helping with business unit delivery and setup. To reduce or eliminate additional workload for the current receptionist/book keeper, an automated billing system will be utilized by technical staff. Sales staff will use a pull down menu to select products and special software packages chosen by customers. A bar code scanner and system for products and additional software will be used for generating customer sales receipts and for accounting and inventory management purposes. Each time a specific product is sold, the inventory system is updated and replacement product is ordered accordingly. Business Plan 1.1 Objectives The computer sales business wishes to increase profits, by expanding product offerings, including business machines, laptops and notebooks. It aims to increase its personal computer customer sales, by offering greater variety. It also aims to expand into business products, with machines that can be used at work stations and that can act as local servers. An overview of organizational goals are listed below. a. Increase profits by 25% within six months b. Achieve 95% customer satisfaction rate c. Attain an average of 6 business customers monthly and increase personal computer customers by 15%. 1.2 Mission The mission of Computer Sales Birmingham, is to provide the best products at the most reasonable price available, to meet the needs of local businesses and individual customers, through knowledge and technical expertise that considers each customer’s computing needs. By adopting a JIT inventory system, developing business delivery and setup services and addressing each customer through a consultative approach, Computer Sales plans to become a competitive computer reseller in the region. 1.3 Management Summary Computer Sales is owned by Jeffrey Data. Jeffrey possesses over 15 years of technical electronics repair experience, which he has recently transferred to the computer industry. He holds a Master’s degree in Business Administration and successfully managed a television and electronics sales business for 15 years, before moving to computers. He also has prior management experience, in the electronics manufacturing industry. Jeffrey has thus far been able to establish close working relationships with individual customers in the local area. While he has done little in terms of advertising, most of the business comes via word of mouth, from students and University faculty. While the business is successful, Jeffrey believes it can be taken to the next level, by expanding the product lines, through marketing efforts and by developing a detailed business strategy. Thus far, customers are very satisfied with the products they purchase and the level of personal service received. Jeffrey aims to increase profits and expand, but not at the expense of losing that personal relationship with customers.Though the business currently employs two highly sales staff, it realizes additional manpower is needed to handle sales of the personal and business customer units effectively. The current part time sales manager is able to oversee the personal computer sales unit, on a full time basis. The other sales person will remain employed part time, but will focus on business sales. A technician to install upgraded packages to new machines and to delivery and setup computers in the business unit will be required. Jeffrey’s philosophy about how customers should be treated is desired in current employees and new hires: the customer needs help, and we're here to help them; the customer is frustrated, upset, or confused - but that doesn't make the customer a problem the customer needs reassurance as well as solutions. (adapted from Palo Alto Software, 2011, p. 6). Though Jeffrey Data plans to remain involved in the operations aspect of the business, he hopes that within a two to three month time frame, the technician and sales staff will learn to rely on their own experiences and knowledge, to meet customer needs. 1.4 Personnel Plan The personnel plan highlights the salaries and employment status of each worker at Computer Sales. Salaries for all employees are included in the business Financial Plan and are listed in the table below. Position Annual Salary Status Receptionist/Book keeper ?26,000 Full time PC unit sales person ?26,000 Full time Business Unit sales person ?14,000 Pull time Installation technician ?26,000 Full time Jeffrey Data, Owner, CEO ?26,000 Full time Prior to the new plan, sakes staffs each earned a salary of ?14,000, while the CEO and receptionist salaries remained the same. The one part time sales person will move to a full time position, which is reflected in the new salary. The additional salary for an installation technician is added to fixed costs as well. Financial Plan 2.1 Assumptions Current average gross monthly profits for the computer repair business are ?8,900, with fixed costs at ?7,609 and variable costs at ?5,111. The office space includes a reception/book keeping area and a back office space for inventory and software installation. Rent for the space is ?765, which includes heat and maintenance, though it does not include office cleaning. Average costs for electricity are ?178 monthly. A computer parts recycler will charge a monthly fee, so that customers can drop off their old machines when they purchase new ones. The cost for the recycling service is ?225 per month. These costs, along with costs for purchasing a company vehicle (?18,000), personnel salaries, inventory and promotions are included in the fixed cost category. Variable costs, at ?3,700, include the new inventory that will be maintained, along with the new JIT inventory system. Because profits are expected to increase by 25%, current average monthly demand for computer should increase by 15%, with the remainder being made up of business computer customers. Average monthly fixed costs: ?12,501 Average monthly variable costs: ?3,700 Total costs: ?16,201 Per Unit Cost: ?351 Per Unit Price: ?589 Units sold: 48 2.2 Six Month Forecast Within six months, the business is expected to meet the initial target of ?12,000 in gross monthly profits ?12,000. Given the average monthly fixed and variable costs, the computer repair will be required to achieve roughly ?28,000 in average monthly gross sales. At ?589 average per computer unit sale, the business will need to sell 48 units of product, to achieve the average monthly gross sales figure. Orders for personal computer products will increase by at least 15%, while the Business Unit will acquire a minimum of six clients each month. Much of the revenue generated from the business unit will come from sales of new business products and installation fees. It is expected that businesses will typically require the purchase of more than one unit of product. Prior to the new expansion into business customers, the promotions plan and implementation of the JIT supply system, productivity was less than optimal. While skilled sales advisors possess the knowledge and ability to keep customers satisfied, The product offering is limited and orders can be slowed, by an outdated inventory system. Sales have also been limited due to the limited store hours. Hiring a technician helps both business units, as he or she may be consulted for customer inquiries that sales staffs cannot answer, will be able to install customized software packages and will be able to install business machines and servers. Expanding the store hours makes it easier for students, faculty and other customers to select the right product in their free time. Market Analysis Summary 3.1 Market Segmentation The existing computer sakes market is competitive, though many stores focus on one or two brands or types of products. In order to focus on growing sales of computer products, the organization has chosen to focus on two market segments, the home PC unit and the small business PC unit. While the small business unit is expected to eventually generate a much larger proportion of profits, the home PC unit will generate the largest proportion of customers initially. Home PC Unit The home PC user market includes individuals, college students, faculty and families within a 15 mile radius of Birmingham city centre, between the ages of 18 and 60, with at least one computer at home or on campus. Gamers are not expected to require much assistance, in terms of sales consulting. They will be focused on performance and specifically on the quality of sound and graphics features of machines. Sales staff will need to become familiar with the various sound and graphics features of the expanded line of machines. The majority of users requiring a new computer are those who may use their computers for academic work, personal taxes and record keeping, email, chatting and social networking. Small Business Users Small business users will provide the majority of our business revenue. The small business market is described as customers within a 20 mile radius of Birmingham, with 2 or more computer work stations, which are already networked or may benefit from networking.  Business use will vary, from one firm to another. Uses may include updating a company website for a traditional store, keeping the books, designing graphics for marketing materials and writing copy for both web and printed advertising. It may also be used more extensively, for incorporating inventory tracking, POS systems, customer databases, online product/service delivery, or product development. Hardware needs will include the same items as home users, plus backup systems, data storage, and wireless networking. According to Palo Alto Software (2011, p. 3), this segment is growing at an annual rate of around 2%. It is expected that much of the business generated by this segment, will come from existing businesses that find the need to become more automated or replace their current computer work stations, to meet their technical needs. 3.2 Marketing Strategy While many current customers are acquired through word of mouth, it is not enough to generate increased revenues. To target families with teens, college students and gamers, the computer reseller will utilise social networking, with its own interactive site. A YouTube video will reach this age group and portion of the PC user segment much more quickly and effectively than a flyer, banner or sign. The company website will also allow for future customer inquiries and for a catalogue of product descriptions and prices. Coupons for ?75 toward the price of a new computer will be available for each user who signs up to receive company news, via email. To reach the small business segment, Computer Sales will use direct mail marketing, with the offer of a free initial consultation. It is expected that most businesses will at least require one new machine, though most will require two or more. The efficient, friendly and competent services provided by staff are critical in acquiring and retaining small business customers. In addition, the computer sales will attend local small business expositions, to increase awareness and promote services. Bibliography Adam, S. & Browne, J., 2009, A Survey of the UK tax system. The Institute for Fiscal Studies, briefing note no. 9. Available at http://www.ifs.org.uk/bns/bn09.pdf [Accessed 10 March, 2011]. Badman, L., 2011, Empirix/Harris poll seeks to illuminate mobile carrier issues from customer perspective. Network Computing. Available at http://www.networkcomputing.com/wireless/emperixharris-poll-seeks-to-illuminate-mobile-carrier-issues-from-customer-perspective.php [Accessed 11 March, 2011]. Palo Alto Software, 2011, Computer repair business plan. Available at http://www.bplans.com/ computer_repair_business_plan/executive_summary_fc.cfm [Accessed 11 March, 2011] Read More
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