London School Unit 6 Business Decision Making Assignment

Assume you work as the Marketing Executive in an organisation of your choice. This organization would like to find out about the viability of launching a new product in the UK market.

The Board has decided to conduct secondary and primary, qualitative and quantitative research in the market.

You have been given the responsibility of conducting this market research for this organisation. The Board is willing to spend a maximum of £50,000 for this project but would like to see how you plan to do it.

Our company is launching a new soft drink in competition with the existing soft drinks. This segment is mainly dominated by two major players **Pepsi and Coca Cola**. There are other small players too in this segment who have carved out for themselves a niche space in this industry. These two firms have their main product and apart from that have different soft drink brands which are targeted for different types of consumers. Consumers tend to have different tastes and trends and hence different soft drink brands are manufactured by the firm for these different types of consumers. The main purpose of the research is to understand the rationale behind the customers to choose a specific soft drink brand. Is it the brand, taste or the appeal or the availability which makes the consumer choose a specific soft drink brand?

The main rationale behind this survey is to understand that whether the customers are willing to experiment in their soft drink collection and also the reasons behind their selection of soft drink brand. There are different soft drink brands and different age group people tend to have soft drinks. Hence the firm needs to understand the rationale behind their selection of the soft drink and what other factors affect their selection. Does age, time of the year and availability makes a difference in their selection of the soft drink brand. Also lastly the firm will like to understand if the customers are willing to shift their preferences if new product is launched.

Following are the objectives of this survey questionnaire regarding launch of new soft drink in UK market

- Analysis of relationship between customer’s preference and market forces to understand the market for a new soft drink launch in UK.
- Analyze the customer orientation to successfully launch new soft drink in UK
- Analyze the factors affecting the choice of selection by the consumer.

Analysis of customer’s choice which provide a background for the development of effective marketing strategy which can be used to attract the customers

Research methodology refers to the various methods of primary and secondary sources of data. This research work covers the methodology of research with the help of Quantitative and Qualitative tools, questionnaire design, sampling used in this research work, analysis of data, budget and time allocation of the research survey. Here data collected from the questionnaire posted directly to the customers will be the main source of data for the analysis and design of the new strategies. Apart from this, the sales data available will form the other source of the data. The questionnaire designed will have the questions to gather both qualitative and quantitative data (Griffin & Ricky, 2011).

Firm will be collecting qualitative and quantitative data using the questionnaire, secondary sources of the data and also the customer’s reaction to their new product. Questionnaire can be used to collect the qualitative and quantitative data. Secondary sources can be used to collect the qualitative data (Bryman and Bell, 2003).

Analysis of the data can be done using statistical tool like SPSS. Firm can use the qualitative data and quantitative to conduct the analysis

Small is the minor portion of the whole population with identical characteristics like the population. Here we use the convenience base sampling which is based upon questionnaire having multiple choice questions (Bryman and Bell, 2003).

Time allocated to complete the survey is three months during which the questionnaire will be distributed among all the categories. Company is planning to contact the major food chains and also target the social media for the questionnaire. Approximately 50% of the budget will be spent in giving the questionnaires to the food chain and collecting and remaining 50% for the social media.

Primary data for this research work is based upon survey questionnaire which is achieved from more than1000 soft drink users in UK from different cities. Following are the questions for the questionnaire:

- Which soft drink you prefer
- How many soft drinks per week you consume?
- Why do you prefer the soft drink
- Does the appeal of the soft drink affect your decision
- Does the marketing strategy affect your decision
- Is there any other factor affecting your decision
- Does your choice remain constant throughout the year?
- Would you drink other soft drink in case of unavailability of your preferred soft drink
- Are you open to try new soft drink

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Andy, the owner of a shop selling clothes, has decided to start a promotion in the store. He has collected some sales data but is finding it difficult to analyse. So he has decided to hire you as his consultant.

The data below shows the amount of money spent by 100 customers and the amount that they spent.

Amount Spent (£) |
No. of clothing items |

20-30 |
12 |

30-40 |
15 |

40-50 |
16 |

50-60 |
20 |

60-70 |
14 |

70-80 |
10 |

80-90 |
7 |

90-100 |
6 |

You are required to calculate the following:

- Mean, Median and Mode and advise him on the best price range. (2.1 & 2.2)
- Range and Standard Deviation.(2.3)
- 25
^{th}Percentile (Lower Quartile) and 75^{th}Percentile (Upper Quartile) and explain the use of Percentile for his store. (2.4) - Inter-quartile range.(2.4)

Following table gives the mean, median and mode

Mean | 12.5 |

Median | 13 |

Mode | #N/A |

The calculations are done in excel. The mean is the sum of the values divided by the number of the values. Here the mean is coming to be 12.5 and median is 13. Since there is no value repeated mode is zero. On the calculated of these ranges the best rate for the firm would be 20-30. Firm can also go for the range 30-40.

Standard deviation and range of the data is given below:

Range | 14 |

Standard Deviation | 4.721 |

**Standard deviation**

Standard deviation is the parameter which highlights the accuracy of arithmetic mean of the data. Here we have the formula for the standard deviation (*Business Essential - Business Decision Making*. 2013).

Now the values from appendix-B are used here in the formula and we have

Range is calculated as the maximum minus the minimum value. These values are calculated in excel.

**Quartile:**

As we know that 25^{th} percentile is a specific percentage of a data as here we have to calculate 25^{th} and 75^{th} percentile (*Business Essential - Business Decision Making*. 2013).

To calculate percentile for a group data we have the following formula

Following table gives the quartile values:

1st Quartile (upper 25%) | 9.25 |

2nd Quartile | 13 |

3rd Quartile (lower 75%) | 15.25 |

4th Quartile | 20 |

The inter quartile range is 15.25 – 9.25 = 6.

The calculations are done in the excel.

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**Discuss the future prospects of the organisation.**

**Firm is seeing a constant growth YoY since 2002. Also the cost as a percentage of the sales has **

The Board meeting of CTD Ltd is fast approaching and you have been asked to present your findings in the meeting. You have to produce a Report and a PowerPoint Presentation to the Board:

** In your PowerPoint:**

- Explain what forecasting is and its benefits to an organisation.
- Explain the relation between sales, cost and profit of the organisation.

** In your report ****also**

**Part i**

Forecasting is estimating the future sales based on past experience along with incorporating the new factors into account and preparing the firm for the future sales. Firm need to form its budget in some expectations of the future. Firm also need to stack up the inventory in expectations of the sales. Firm should not lose out due to lack of inventory. Also there are inventory costs due to the high inventory. Hence firm should maintain appropriate level of inventory to save costs. Thus forecasting becomes a necessary tool for estimation of sales of the firm.

Sales also tend to be seasonal for some firm. Hence the firm needs to keep that in mind and while forecasting use the techniques which take into account the seasonality factor.

Thus using the seasonality into account, firm should forecast it sales to prepare the firm for the future sales and also maintaining the appropriate inventory for the expected sales.

Forecasting helps the firm in having a base for budget planning and inventory management.

**Part ii**

Firm main aim is to increase the sales. As the sales of the firm increase, cost of the firm increases and the profit of the organization increases. However firm should try to contain the costs and increase more profit. Thus sales profit and costs are correlated for the firm. But the firm can try to reduce the costs and increase the sales and profit for the firm.

**Part iii**

Reduced over the past period. Thus the firm needs to capitalize on the strong growth track record. The firm has good prospects. Thus the firm should to increase the sales of the firm and minimize the costs. The firm sales are increase at a rate of 14-15%. Firm should maintain this growth rate and concentrate more on inventory management and reducing the costs of the firm

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Q 4.2**: **The activities involved in a computer installation project are given below:

Activity |
Preceding Activity |
(Days) |

A |
- | 5 |

B |
A | 2 |

C |
A | 6 |

D |
B | 10 |

E |
D | 3 |

F |
C | 7 |

G |
E | 9 |

H |
F | 4 |

I |
G | 8 |

J |
H,I | 2 |

**Required:**

- Prepare a Gantt Chart for the activities using Open Project
- Prepare a network diagram for activities using Open Project.
- Calculate the Project Duration.
- Clearly mark the Critical Path.

A company is considering which of two mutually exclusive projects should be undertaken. Both projects have the same initial investment and length of life. The company anticipates a Discounting Factor of 10% and future cash flows of the projects are as follows:

Year |
Project A
Cash flow |
Project B
Cash flow |

Investment |
-200,000 |
-200,000 |

1 |
30,000 |
50,000 |

2 |
85,000 |
75,000 |

3 |
95,000 |
105,000 |

4 |
80,000 |
60,000 |

5 |
40,000 |
35,000 |

**You are required to:**

- Calculate the NPV and IRR of each project.
- Recommend, with reasons, which project you would undertake (if either).

*Note: Please use 20% as the second Discounting Factor while calculating IRR.*

**Write your answers here**

In the question excel formulas are used to calculate the NPV and IRR. Following table gives the results. The calculations are shown in excel:

Year | Project A | Project B |

Cash flow | Cash flow | |

Investment | -200,000 | -200,000 |

1 | 30,000 | 50,000 |

2 | 85,000 | 75,000 |

3 | 95,000 | 105,000 |

4 | 80,000 | 60,000 |

5 | 40,000 | 35,000 |

NPV | -6340.020576 | -2485.210905 |

IRR | 19% | 19% |

The NPV is calculated using NPV formula of excel. Here each cash flow is discounted using the cost of

**Capital as 20%.**

Here both the NPVs are coming as negative. Similarly IRR is calculated using the IRR function of excel. The rate for which for which NPV comes to 0 i.e today’s cash flow is equal to the sum of the discounted cash flow is taken as the IRR. Here for both the cash flows IRR is 19%. This is less than 20% and hence the NPV is coming negative.

**Analysis**

Here for both the projects the NPV is coming as negative and also the IRR is less than the cost of capital. For a firm to accept the project NPV should be positive and also the IRR should be greater than the cost of capital. Here both the conditions are not satisfied and hence the firm should not undertake both the projects as undertaking any of the project will make the firm lose its value.

__MERIT CRITERIA ONLY__

In order to achieve Merit, students must achieve all the Learning Outcome, all merits plus M1,M2 and M3

**MERIT ONE & MERIT TWO**

“Statistical data can be used by companies in various ways to analyse current performance and future projections.”

Using the data in Q2 produce a Histogram and a Frequency Polygon in MS Excel. Please clearly label the X-axis, Y-axis and Legend Keys.

Discuss whether statistical data can be used for making future business decision and what are the possible advantages of using statistical data for these purposes.

**MERIT THREE**

“The purpose of a Gantt chart is to display a project schedule in a visual way that is easily understood.”

Based on the Gantt Chart that you produced for Q4.2 and the graph generated from that Gantt chart, state the advantages and disadvantages of using Gantt Charts as a Project Management Tool. Present this in a short report format.

The Gantt chart drawn gives the idea about the process. User can easily understand the flow of the process and which activities are need to be completed before proceeding to the last ones.

**Advantages**

Gantt chart gives the flow of the process and hence by looking at the Gantt chart the user can immediately understand the flow of the process. It is easy to grasp the predecessors using the Gantt chart rather than the table. It helps the use r to organize his/her thoughts. It can help the user to set the time frame of the task Since the user is clear of the flow and number of days required it can easily judge the time frame of the project.

**Disadvantages of the Gantt Chart**

If the number of task increases then it can becomes very complex for the user to understand the flow. If there is any update in the process or if the any process can be eliminated updating it is a complex process.

They can become large if there are too many tasks to be done.

__DISTINCTION CRITERIA ONLY__

**Distinction**

In order to achieve Distinction, students must achieve all the Learning Outcome, all merits plus D1,D2 and D3

**DISTINCTION ONE, TWO &THREE**

“Financial evaluation is an important step while making Capital Investment Decisions.”

As a new finance executive in a bank, write a memo to your Finance Director and critically reflect on this statement. Evaluate whether the Capital Investment Appraisal (CIA) process and the tools used for financial evaluation are useful to the decision making process and justify your conclusions

To

Director of Finance Dept.

Dear Sir,

Capital Investment Appraisal techniques form an important tool to assess the suitability of the any project that will be undertaken by the firm. In a capital investment appraisal technique using different tools it is measured whether the firm will benefit if a particular capital project is undertaken and the firm invests money in the project. Thus capital investment appraisal process is an essential took to make investment decisions by the firm. In a capital investment appraisal process the firm estimates the cash flows from the projects which are expected if the firm invests in the project. These cash flows are after tax cash flows. After determining the cash flows, firm needs to determine the appropriate discount rate at which the firm will discount the cash flows. Using the tools like NPV, IRR and payback period firm decides whether the firm will benefit if it invests in the project.

There are different tools like NPV, IRR, Payback period and Accounting rate of return which are used to do the appraisal of the process. NPV is the net present value. In this the after tax cash flows are discounted using the appropriate cost of capital. This represents the actual value add to the firm if the firm undertakes the project. Hence it should be positive of the firm needs to undertake a project. Larger the value better it is for the firm. IRR is the internal rate of return. This gives the return of the project. This value should be greater than the cost of the capital for the firm to enter into project. Payback period is time in which the firm will get back its initial investment. Thus it adds up the cash flows checks in how many years firm will recover the cash flows. Lesser the value better it is for the firm. ARR is accounting rate of return. This takes into account the accounting cash flows and not actual after tax cash flows to make the decision. Of all the metrics NPV and IRR are the most widely used metrics used in the capital investment appraisal process.

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