Factors to Be Considered for the Companys Success - Report Example

Results In this report, it is proposed that the company should introduce two new product ranges, including a clothing range and a furniture range. Moreover, the initial pricing strategy should be a penetration pricing strategy, where products will be sold for a low profit margin. In addition, technology, direct marketing, and merger and acquisition should be considered for the company’s success. The prepared budget is based on company performance from the last three years; it analyses economic conditions and market positioning. The estimated growth rate based on revenue from the last three years is 35.92%, and this is used for calculation of next three year budget. Based on this calculation, estimated revenue for year 1 is $23,387,055; year 2 is $33,631,238; and year 3 is $48,362,660 (see Table 8). This report takes into account the scenarios for estimated increases in revenue where a calculation is used to increase revenue by 5%, 10%, and 15%. To achieve this target, a proposed plan is also discussed in this report (see Table 7). Assumptions The underlying assumptions in this analysis are as follows: 1) The budget is estimated based on the growth rate budgeting technique 2) The growth rate is calculated based on the last three years of actual performance 3) An assumption is made that the company will maintain the current growth rate for the next three years 4) For budget purposes, it is assumed that the company will continue providing all of the product ranges that it is currently selling. 5) Market conditions have changed from 2009, notably with less inflation and higher unemployment. Risks Anticipated risks are found within the competitive marketplace, small store sizes, and technology. Scenarios What if the economy picks up? If this were to occur, sales and revenue would increase more than what we have predicted. Another scenario is that what if demand for the products that the company sell increases. In this situation, the company would experience high sales growth. This means that high revenues would be generated by the company. What if some competitors went out of business due to the bad economy? This would be a good opportunity for this company to generate more revenue. This is because the company would not waste money trying to outdo its competitors and could instead focus more on the company’s business operations (see Table 7). Data Analysis and Empirical Rule There are two data sets that are used in this analysis; one shows the monthly and yearly (3 years) revenue and profit for each region and its categories, while the other shows the forecasted revenue for each region and its categories. These data sets were collected over the whole time period, implying that there were variations in the data. Consequently, there was also variation in these data sets. In this data, the dependent variable is time, while the independent variables are revenue in the first data set and forecasted revenue in the second data set. Since the variables are numeric, a regression analysis can be applied. In this regard, the regression analysis reveals that 2% of revenue and 4% of forecasted revenue are contingent on time. This makes sense because there are many other factors that may affect both the revenue and the forecasted revenue, such as the region or category. However, both of these factors are categorical, which means that neither the regression analysis nor the time series could be applied to this model. The best ways to explain these data are because of the average and median. Moreover, the best way to predict the budget is by using a variance analysis, which requires finding out the growth rate. The growth in revenue and forecasted revenue increases by time. However, there are some risks that may affect this growth. For example, when a company doesn’t use technology to monitor its sales, it would be late too late for the realization stage. This may affect all of the stages. Other risks that may impact the company are a competitive marketplace and small store sizes. All of these risks must be taken into account before forecasting and developing a budget. Recommendations For the aim of improving the company, various recommendations are put forth. First, a plan to introduce a discount pricing strategy and seasonal pricing should be implemented. By using a discount pricing strategy, revenue would increase and costs would decrease due to economies of scale. Second, the company should make use of technology. Technology is one of the biggest factors that leads to a retail business’s growth and success. For technological enhancement in our business, the organization should introduce a customer relationship management system that is linked to our online sales and main sales database. By integrating customer relationship management, the organization will be able to get closer to its customers. Moreover, this will help us to improve our business strategies, and the result will be increased revenue and future growth. Third, consider supply chain management by introducing a Radio Frequency Identification (RFID) system that is directly linked with the main database. This means that every transaction will have an automatic effect on its stock. Then it will be linked with the supplier database, where an auto order placement system will be introduced. As soon as stock reaches reorder level, the system will automatic deliver an order to the supplier. Customer Behavior Another risk is that customers may not accept new products, thus the budget will not be accurate. Microstrategy Reports There are two reports that provide the CFO with the appropriate materials to measure the performance of the company. These are the yearly revenue and profit reports for each category in each region (see Report 1) and also the yearly forecasted revenue reports for each category in each region (see Report 2). There are other alternatives to these reports, such as sales reports, monthly sales and profit margin reports, or revenue over time reports. The two reports that I suggested above are better than the alternatives because they cover all key performance factors. By analyzing the alternatives, we can see that the first one just focuses on the category. Also, it shows only monthly performance. As a result, it takes a long time to analyze it. Doing a comparison by using this report is not practical. The second alternative report is the monthly sales and profit margin report. This shows the same problems as the previous one; it is hard to analyze because it only shows monthly performance. In addition, looking at the profit margin is useless for this analysis. The third alternative report is the revenue over time report. This report does not allow us to make a comparison between the region and categories. Using the yearly revenue and profit reports and forecasted revenue reports for each category in each region is useful for this analysis. This is because we can make a comparison between all regions and categories. Moreover, measuring yearly performance would be easier with using this report. Also, it covers all the key performance factors that we need to monitor the company’s production, such as revenue forecasts and forecasted profit. Moreover, by using the actual revenue and forecasted revenue, we can predict the future and develop an appropriate budget. The report should be generated once each week. This way, we can look at the information that the CEO and CFO use to measure the company’s performance and then to decide what actions the company needs to do. Generating these reports as soon as possible can help the company to achieve the realization stage early, which helps the company in the long run. The best way to deliver the report is through e-mail; otherwise, any system that the company uses to exchange information would be good. This is the easier and fastest way to convey information to the CFO. Moreover, microstrategy makes it easier to use an iPhone or iPad to receive the reportsthat way also. Using a device such as an iPhone to receive reports is ideal because it is easy to use and is handy. Microstrategy Dashboard There are two dashboards that would be provided to the CFO. Due to the fact that we developed a budget based on the actual figures versus the forecasted figures, the best way to represent the data visually is through using two dashboards. One of these dashboards will represent the actual data, while the other will represent the forecasted data. Each of these dashboards has four quadrants. The first one shows the whole report in the form of a table. The second compares the regions based on the revenue in the first dashboard and forecasted revenue from the other one. The third quadrant shows revenue in the first dashboard and forecasted revenue in the other dashboard for each category in each region. The last quadrant shows each region’s revenue in the first dashboard and forecasted revenue in the other one (see Dashboard 1 & 2). Read More