Business Decision-Making Issues - Assignment Example

Running header: Business decision making Student’s name: Instructor’s name: Subject code: Date of submission 1.1 The plan for the collection of primary and secondary data that will be useful for the launch of the restaurant. Step 1: We will tour the area in which we intend to establish the restaurant in a bid to establish the number of small restaurants available. Step 2: We will select randomly five small restaurants from which we will collect our primary data. Step 3: We will decide on the techniques to be used in collecting the data and obtain permissions where necessary. The methods will include interviews, observation and questionnaires. Step 4: We will visit each of the restaurants in a bid to observe how the restaurants are operated. We will also interview top managers regarding management and the visitor numbers as well as their requirements (Wisnewiski 2010). In addition, we will also interview some of the guests regarding what they consider good service as well as their needs. In addition we will issue questionnaires which those concerned can fill and send to us through email. Step 5: For secondary data, we intend to analyze data contained in government websites regarding visitor numbers and demand. Step 6: We will analyze the notes we will have gathered in the above steps in a bid to extract the data Justifications of the methods: The methods used in collection of both primary and secondary data were deemed to be reliable and accurate. The ability to get first-hand information was also considered in selecting the methods. In addition, the methods were selected due to their law cost given that we don’t have a lot of money. 1.2 Sampling frame and survey methodology As stated above, we will collect our data from only five small restaurants owing to time and cost constraints as well as the need to collect data that is sufficient for our need. Both the restaurant management and customers will be involved. this is because we would want to gather information related to how the restaurants are operated as well as what good customer service constitutes and what to expect our customer numbers to be (Alvin 2013). In selecting the sample, random sampling will be used owing to cost constraints. As stated above, we deem three survey methodologies to be most appropriate for our investigation. These include observation, interview and questionnaire because they are cheap and we are able to gather reliable data. 1.3 Sample questionnaires 1. Gender ( Tick where appropriate) Male Female 2. State your age 3. What is your annual income range (Tick where appropriate) Below 10,000 10,000-20,000 21,000 -30,000 31,000 and above 4. How often do you visit a restaurant ( rarely, once in a while, often, every day) (Please specify) 5. Which criteria is most important to you when visiting a restaurant (give a rating of 1-5, 1 as most important) 1 2 3 4 5 Restaurant concept Dining environment Food quality Service quality Price Convenience 6. What food do you prefer most when you visit a restaurant (Specify) 7. How much would you spend for a meal in a restaurant 50-60 60-100 100-150 150-200 201 and above 2.1 Sales Expenses Net income Year £ £ 1995 15000 20000 1996 20000 25000 1997 24000 30000 1998 20000 40000 1999 18000 35000 2000 25000 50000 2001 20000 45000 2002 30000 65000 2003 24000 45000 2004 28000 55000 2005 30000 60000 2006 40000 90000 2007 22000 45000 2008 15000 34000 2009 25000 52000 2010 35000 62000 2011 16000 38000 2012 28000 56000 TOTAL 435000 847000 Mean 24166.67 47055.56 Mode 20000 45000 Median 24000 45000 Net income mean =£47,055.56 Net income mode =£45,000 Net income median= £45,000 2.2 Mean, mode and median Mean- mean is the average or the sum of all values in a given data set dividend by the number of observations in the dataset. Mode-the mode is the number or value that occurs most often in the data set. Median – this is the number or value that occurs at the middle of a list of numbers in the data set. b) Advantages of mean –mean makes use of every value in the data and hence is considered a good representative of the data (Foster 2001). In addition, mean is the only measure of central tendency that best resists the fluctuation between different samples and is the most common measure of dispersion. Disadvantages of mean-mean are sensitive to extreme values/outliers especially where the sample size is small. As such, it cannot be a good measure of central tendency for skewed distribution. Advantage of median –the advantage of median is that it is not affected by very big and very small values. Disadvantages of median- median may take a long time to calculate for a relatively large data set. Advantage of mode-this is the only average that can be used when the data is not numerical. Disadvantage of mode- there may be more than one mode while at other at other times, there may be no mode at all. The mode may also not be an accurate representation of the data. c) Analysis of the data calculated above-both the mode and median of the net income were £45,000. On the other hand, the mean of the net income was £47,055.56. This is an implication that mostly HMV earn an income of between £45,000 and £47,000. d) Conclusion about net income- HMV mostly earns an income $45,000-$47,000. Thus, the company ought to plan with these figures in mind. 2.3 a standard deviation 16632.61 b) Standard deviation is important in showing how individual year’s incomes deviated from the mean income for the business. As such, the business will use this information to establish reasons why income in some years deviated more than the standard deviation (Josphine 2011). This will help establish the risks that the business is exposed to and hence take steps aimed at reducing the risk and solving the causes of deviation hence ensuring that the business performs better in the future. c) The range about the mean within which approximately 95% of the net income values fall. We use excel for this calculation The range is46, 809.72- 47,301.39 Interquartile range of the net income data 22000 25000 30000 35000 34000 Lower quartile 34,000 38000 40000 45000 45000 Median 45,000 45000 50000 52000 55000 56000 Upper quartile 56,000 60000 62000 65000 90000 Interquartile range 22,000 80th percentile Total numbers 18 80th percentile 14.4 is 14th number which is 56000 2c) Explain how HMV may use quartiles, percentiles and correlation coefficient to draw useful conclusions for the business. The business may use the correlation coefficient to determine whether there is any relationship between the company’s revenue and advertising costs. If it is established that such a relationship exists, then the company can increase its resources allocation to advertising in a bid to increase revenue. On the other hand, the percentiles and quartiles will help the company in increasing its revenue generation efforts so that it can perform a certain level of profitability. 3a)Graph of advertising vs. sales Conclusion: the amount of sales depends on the amount of resources used in advertising. Hence the firm should increase the funds allocated to advertising in a bid to increase sales revenue (Paurav 2011). 3b) Bar graph Conclusion: Birmingham is the best performing branch while Stoke is the worst performing branch. Therefore, there is need for other branches to copy Birmingham’s best practices in a bid to increase sales. 3cHistogram Conclusion: The hourly rates are dependent on the number of hours worked. Hence there is need to peg salaries on other factors in controlling wage bill 3.2 Scatter diagram and trend line To obtain the equation for the trend line Y=mx+c M is the gradient and c is the y intercept Gradient = change in y/change in x = 6300-1200/16-2 =340 C=1200-m C=6300-16m 1200-m=6300-16m 15m= 5100 M=340 But 6300=340*16+c C=860 Thus the equation = y =340x+860 24th month sales Y=340x+860 But x= 24, thus, Y= (340*24) +860 =$9,020 At 24 months, sales will be $9,020 At 30 months, sales Y=340(30) +860 Y= $11,060 At 30 months, sales will be $11,060 Conclusion: The relationship between sales and time is almost linear (Jared 2010). Iva) Forecasting – forecasting is the use of historical data by businesses in a bid to determine the future performance trend. In other words, the business uses historical data to estimate and decide how it wants to perform in future. b) uses of forecasting- businesses put forecasting into various uses including; i) The business will use forecasting to predict the new products and services that will be introduced in the market and which markets to enter or exit and how to improve sales efforts in a bid to hit sales targets. ii) Forecasting is used by businesses in making production, procurement and logistical plans in accordance with the forecasted sales. iii) Financial professionals make use of forecasting in making financial plans and project their earnings expectations which act as a guide to the company in putting effort in a bid to hit the projections. c) Advantages and disadvantages of forecasting- the main advantage of forecasting is that of providing the firm with valuable information for making decisions about its future. In addition, forecasting guides the organization’s effort into achieving the forecasted results (Keith 2011). However, forecasting has some disadvantages which include the inability to accurately forecast into the future and given the qualitative nature of forecasting, businesses come up with differing scenarios depending on their interpretation and hence it is not possible for an organization to rely on a particular forecasting method. Making of decisions based on bad forecast would result in a business’ financial ruin and hence it is not wise to make decisions solely on the basis of forecasts. Using the excel function, sales for the period Jan 2011 to June 2011 will be $3490. 3.3 found in the attached PowerPoint presentation 3.4 BUSINESS REPORT Olive oil Company Limited Report regarding the company’s performance To the Chairman of the Board Dear Sir RE: COMPANY PERFORMNCE IN TERMS OF SALES REVENUE AND ADVERTISING, NET INCOME AND EMPLOYEES PAY This report has been prepared with an aim of gauging the company’s performance in the areas stated above. As can be seen above, the report makes use of various analysis techniques including pie charts, bar graphs, line graphs and histograms in the analysis. The report has also used forecasting techniques including use of trend line equations in a bid to forecast future company performance. These techniques were chosen because of their simplicity and ability to give a more balanced view of the company’s performance. Arising from the above analysis, the following observations have been made; The costs of both advertising and sales have been rising every year. As the cost of advertising increases, the amount of sales revenue also increases. The coefficient of correlation has also revealed that the two items are highly correlated. As such, there is need to increase the cost allocation to advertising in future periods in a bid to boost sales and hence profitability. The company’s net income for the branches differs a lot amongst the five branches. It has been noted that Birmingham performed the best while stokes performed the worst as per the charts above. As such, there is need for the organization to establish the cause of poor performance in some branches. In addition, other branches ought to benchmark with Birmingham and copy its best practices in a bid to improve their performances and hence overall organizational performance. It has been established that employee pay rate increase with the number of hours worked generally according to the histogram above. This implies the need to incorporate other factors in the determination of pay in a bid to bring down the cost of labor thus increasing profitability. In conclusion, the company ought to increase efforts aimed at achieving the sales forecasts above in a bid to improve its overall performance. Overall, sales forecasting has been deemed important owing to its ability to focus organizational resources and effort towards achievement of future performance targets thus leading to a general improvement in the company’s performance. It is hoped that the company’s management will find this report useful in planning for future organizational performance. Yours sincerely, Smith White. Reports and presentations officer. 4.1a) The use of management information systems (MIS) in the following levels; Operational level- the MIS are used for recording all daily routine transactions in the organization. They mainly supply summary data to decision support systems and management information systems used at other levels of the organization. They include such systems as sales and marketing systems that record sales transactions while providing details on marketing and promotional activities. Manufacturing production systems record details of purchases, production and shipping of goods. Financial accounting systems are useful for maintaining data in organizations while human resources systems maintain data regarding employees. Strategic level –the management information system at this level are used for providing managers with flexible access to information at the tactical and strategic levels and for monitoring operating results as well as general business conditions (Rob 2007). They are useful in monitoring both internal and external environment of the company while highlighting information that manager at the strategic level should be aware of. Tactical functioning of an organization- the management information system provide managers at the tactical level with information that enable them make timely and effective decisions useful in planning and controlling the activities for which they are responsible. They convert data and information and pass this information to the managers at the tactical levels. Software useful at Operational level – they include software that helps generate data such as the payroll systems and accounting systems such as quick books. Tactical level- such software include web based digital dashboard that gives tactical managers accurate and real-time information regarding customer complaints and marketers performances. Strategic level- these include softwares that generate such reports as annual reports while comparing them to competitors. A company’s ten year plan is an example. 4.2a) project management is of vital importance to the hotel building this will involve dealing with human resources, budgetary and supply constraints. As such, there is need to create plans on how to monitor and control processes while addressing resources conflicts (Rob 2007). This will also ensure that the project is completed within schedule as far as time and budget is concerned 4.2a: PERT Diagram 4 days 10 days 10 Days 9 Days 10 Days 6 Days 8 Days 16 days 5 Days 9 Days 6 days Path A-B-D-E-G-J =4+10+6+8+5+6 =39 Days Path A-B-C-E-G-J= 4+10+9+8+5+6 =42 days Path A-B-F-H-J= 4+10+16+9+6 = 45 days Hence, the path with the longest duration is Path A-B-F-H-J with 45 days and is hence the critical path 4.2b) early start-it refers to the earliest that any activity in the project schedule can be scheduled to start bearing in mind the logic and constraints that have been identified in the schedule. ii) Late start –this refers to the latest that a project activity can be scheduled to take off without being forced to reschedule the calculated early finish of the project. iii) Early finish –it refers to the earliest that the activity can be scheduled to have been completed within the logic and constraints identified in the project schedule. iv) Late finish –it refers to the latest that a project activity can be scheduled to have been completed without being forced to reorganize the late finish of the project. On the other hand, the late finish of the project refers to the late finish of the last activity to be completed in the project. v) Slack refers to the amount of time a task can be delayed without having to impact on the start date of the subsequent task. vi) Dummy – A dummy activity is an imaginary activity that does not exist in the project activities. However, it is used to show the dependency relationship between two or more activities and is represented by a doted arrow. vi) Critical path –this refers to the longest path from the beginning to the end of the project Gantt chart Please refer to the attached excel sheet since the chart cannot fit on this page. 4.3 a) PV, PV and IRR are found on the attached excel sheet 4.3b) From the excel sheet attached, it has been established that the project will have a net present value of £23,670.17 and its IRR is 13%. Since the project has a positive net present value and an IRR of 10% which is above the average cost of capital, the project should be considered viable and hence suitable for investing in since it will give one a good return on investment (Kerzner 2013). IRR and NPV are related in that while the NPV is the sum of all current and future cash inflows and outflows, internal rate of return in the rate of return or discount rate that is computed in a way that it makes the net present value of the project to be zero. This means that the NPV is only greater than zero only when the IRR is greater than the discount rate. Thus, they both provide a similar answer concerning the viability of a project. References: Wisnewiski, M2010, Qualitative methods for decision makers, Taylor & Francis, New York. Alvin, C2013, Marketing research, Prentice Hall, Sydney. Foster, D2001, Basic business statistics, Springer, New York. Josphine, B2011, Business and economics statistics, Rutledge, London. Paurav, S2011, Essentials of marketing research, Oxford University Press, Oxford,. Keith, O2011, Principles of business forecasting, Cengage Learning, Western Australia. Rob, H2007, Forecasting: Methods and applications, John Willey & Sons. Jared, B2010, Forecasting: Principles and practice, Rutledge, London. .Nick, G2015, Project management for dummies, John Willey & Sons, New York. . Kerzner, R2013, Project management, John Wiley & Sons, New York. Read More