Assignment Unit 6 Business Decision Making

19-12-17 Maddox Smith 0 comment

Assignment Unit 6 Business Decision Making

Introduction

Assignment Unit 6 Business Decision MakingDecision Making can be defined as the procedure of selecting the best among the different alternatives. A large number of alternatives are found in an organization. The effective decision making helps to properly organizing, directing, and controlling the different aspects of an organization. Effective decision making helps in perfect working of the organization and leads the organization to achieve success.
ABC Ltd. is medium sized British supermarket. For the smooth working of the organization and gain more competitive advantage in the market, the management need to gather information about the market structure and the needs of the consumers. The more they cater the need of the customers and provide effective customer service, the more they will be able to gain success in the market.  In order to know about the market structure and understand the need of the consumers, the management needs to conduct a research. The research will help to gather the primary and the secondary data. The analysis if this data will help in the process of accurate decision making in the organization.

Task 1

1.1 Collection of primary and secondary data

The management of ABC Ltd. wanted to expand their business in the existing nation as well as launch a new supermarket in another country. Initially the management has decided to launch a new super market in Wales. However, before launching a new branch, the management needs to conduct a research in order to acquire primary and secondary data.

The data need to be properly analyzed for the purpose of undertaking effective decision for opening a new super market in Wales.

Primary Data

In order to know about the requirements and attitudes of the people in Wales it is very important to gather the primary data. The primary data can be defined as the data which is gathered for the   first time with the direct effect of the researchers (iwh.on.ca, 2014). The collection of primary data is time consuming as it is lengthy procedure. The primary data collection procedure is also very expensive. However, the data collected in this procedure is always current. For developing an idea about the market structure, the collection of primary data is very essential because the data collected is highly relevant in order to plan the marketing strategy and undertaking effective decision.

There are several ways in which the primary data can be gathered. The several process of gathering data is shown in the following figure:

In the current scenario, the primary data can be gathered with the help of the survey. The survey is chosen for the collection of primary data because they help to acquire a wide range of response from the population. The survey is quite a lengthy procedure, but the information collected will be very beneficial for the management of ABC Ltd. in order to conduct the survey, the management has to prepare a questionnaire and choose a sample frame in a particular place in Wales.

Secondary Data

  • In addition to the primary data, the collection of secondary data is also very essential. The secondary data can be defined as the data which has been gathered previously for some other purposes. The secondary data is utilized for the economic and social analysis. The secondary data is thus different from the primary data. The acquiring of secondary data is very important as it helps to make the primary data more precise. Furthermore, the collection of secondary data requires lees time, effort and money. But, the secondary data can be outdated and can mislead the management by undertaking improper decisions (iwh.on.ca, 2014).
  • The different sources of secondary data have been shown in the following figure:
  • The management of ABC Ltd. can collect the secondary from the internet, website as well as from the records of the sales, income, expenditure, profit of the company. With the help of the secondary data, the management of the organization can gather information about its position in the market.

1.2 Survey Methodology and Sample Frame

  • As said earlier, a survey has to be conducted for collecting the primary data. The survey helps to acquire wide response from the population. For conducting the survey, it is important to plan a proper survey methodology. In the current project, the management of ABC Ltd. can conduct the survey in Cardiff in Wales which is the capital city of Wales and is the chief commercial centre in the country. Cardiff is also a major tourist destination in Wales. Thus, the management can acquire a wide range of response in this city. The management of ABC Ltd. has decided to conduct the survey in a market place in Cardiff (Socialresearchmethods.net, 2014).
    The survey consists of two essential features. These two features are questionnaire and sample frame. The questionnaire will contain all the important questions relevant to the purpose for which the survey is being conducted. Preparation of the questionnaire is time consuming but it will help to gather important data regarding the market structure and the behavior and the attitude of the consumers(Socialresearchmethods.net, 2014).
    The sample frame is also needed to be chosen for carrying out the survey. The sampling frame will enable the management to outline the sample population for the statistical treatment. The sampling frame is done because it is very reliable and consumes very little time. For proper sampling, it is important to study the population(surveyonics.com, 2012). After studying the population, method of sampling has to be chosen. There are different methods of sampling which are as follows:
  • Simple Random Sampling
  • Stratified Sampling
  • Cluster Sampling
  • Multi-sage Sampling
  • Quota Sampling
  • The management of ABC Ltd. has decided to expand their business by opening a new supermarket in Wales. For this reason they will conduct a survey for analyzing the attitude, behavior and preference of the customers.  As mentioned above, the survey will be conducted in Cardiff in Wales near a supermarket. The management has prepared to prepare a questionnaire for this purpose. The sampling frame will be done in random sampling method, where the people aged 18 and above will be given the opportunity to take part in the survey. The survey will be conducted on 100 people(surveyonics.com, 2012).

1.3 Questionnaire

  • Rules to prepare Questionnaire
  • In order to prepare a questionnaire, the management needs to follow the guidelines that are very essential. The questionnaire should be made according to this principles and rules for collecting effective data that will help in undertaking important decision for expanding the business. The following rules and regulations have to be followed in order to design a questionnaire:
  • The questions should be relevance to the purpose of the research
  • The questionnaire should contain open ended and close ended questions
  • The questionnaire should be framed with unbiased questions
  • The questionnaire should be able to obtain accurate and complete information
  • The questions should be easy and understandable for the respondents (Library.bcu.ac.uk, 2011).
  • Questionnaire
  • By keeping in mind all the important rules and regulation, the management of ABC ltd. prepared a questionnaire that will help them to gather data that will help them to understand the problem of customers for which they are complaining.
  • Mention your gender?
  • Male
  • Female
  • Mention your age group?
  • 18-27
  • 28-37
  • 38-47
  • 48-57
  • 58 and above
  • Do you shop in ABC ltd?
  • Yes
  • No
  • How much you spend in ABC Ltd in a month (£)?
  • 31-50
  • 51-70
  • 71-90
  • 91-110
  • 111 and above
  • Are you satisfied with the customer service infrastructure in the company?
  • Yes
  • No
  • Are the customer service staffs of the supermarket helpful?
  • Yes
  • No
  • Were they able to identify and handle your problem?
  • Yes
  • No
  • How quickly your queries are being addressed?
  • Immediately
  • Within a day
  • Within few days
  • Within a week
  • Not responded
  • Rate the customer service in ABC Ltd.? (1-5, 5 being highest)
  • Very good
  • Good
  • Fair
  • Poor
  • What else can be done to upgrade the customer satisfaction service and content you?

Task 2

2.1. Use representative values to summarize this data and create information to help with the decision making.

12 19 8 21 32
25 34 22 30 20
43 21 16 45 32
27 38 39 21 18
33 11 28 26 27

The above table is showing the marks obtained by the twenty five staff in the examination of the Excel spreadsheet. The total marks in the examination were 50 and the pass marks was 20.

Standard deviation 9.69
Average 25.92
Median 26
Mode 21
Quartile 1 20
Quartile 2 26
Quartile 3 32
Quartile 4 45

The data has been analyzed with the help of the representative values. The mean is 25.2. This means that the average marks in the class is 25.2. The median is 26. The mode obtained from the data is 21. This means that majority of the staff got 21. Nobody failed in the examination. The lowest number is8 and the highest number is 45. No one in the class obtained full marks in the examination. 50 percent of the staff in the class has obtained less than 26 marks. This clearly indicates that the staff should work hard in order to perform better. The management of the organization should take steps to motivate the staff and improve them.

2.2 The Production manager is concerned about the number of rejects computers produced by ABC Ltd and requested you, as part of management information for decision making, to carry out some data analysis from the table about number of rejects computer for past 10 weeks.

13 17 7 17 22
3 30 28 23 24
19 23 25 24 15
23 16 18 27 27
11 9 21 24 3
22 33 22 13 23
28 28 19 21 24
22 24 29 26 26
22 23 12 20 26
31 8 20 25 27

The above table is displaying the number of rejected computers manufactured by the ABC Ltd. for the last few weeks. This data is needed to be analyzed in order to make effective decision in order to reduce the problem and prevent manufacturing of rejected computers.

Ungrouped Frequency
Number Frequency
3 2
7 1
8 1
9 1
11 1
12 1
13 2
15 1
16 1
17 2
18 1
19 2
20 2
21 2
22 5
23 5
24 5
25 2
26 3
27 3
28 3
29 1
30 1
31 1
33 1
Grouped Frequency
CI Frequency
1-7 3
7-13 6
13-19 7
19-25 21
25-31 12
31-37 1
Analysis of the result
Mean 20.86
Median 22.5
Mode 23
Standard Deviation 6.925345
Quartile 1 17.25
Quartile 2 22.5
Quartile 3 25.75
Quartile 4 33

Mean can be defined as the average of all the numbers in a set of data. In the above table the mean is 20.86. Thus the average of the failure is approximately 21 which are quite high.  There have been about 1043 failures in ten weeks. The median is 22. 5. The mode is 32. This implies that the maximum number of rejected computers manufactured each day is 23.   The highest number of rejected computers manufactured in a day is 33 which are quite high. The minimum number rejected computers manufactured in a day are approximately 7. The average number of rejected computers produced per week can be 106-111 mark. But the week 1, 5, 7 and 8 are exception to this. In order to understand the average number of failures, it is very important for the management of the organization to compare the results with the previous five years.

Week 1 76
Week 2 108
Week 3 106
Week 4 111
Week 5 68
Week 6 113
Week 7 120
Week 8 127
Week 9 103
Week 10 111

2.3 calculate the values within three standard deviations of the mean

SD 1000
2 SD 1000000
3 SD 1000000000

2.4 Tools for Business Decision Making

For undertaking proper business decision, it is important to analyze the gathered data with effective tools. The measures of dispersion are an essential tool for effective business decision making.  The measures of dispersion are utilized in order to obtain an idea about the degree of variation in a data set (mindtools.com, 2014). There are three ways of measuring the dispersion:

Standard Deviation

Standard deviation is the difference between the average and the individual values incorporated in the average. The standard deviation is represented by the Greek word sigma. It is considered to be the most important measure of dispersion because it possesses all the essential properties of variance (Manikandan, 2011). It is also called the square root of variance. It is computed by the following formula:

formula

Range
The difference between two extreme values in a set of data is called range. This is the simplest form of measuring dispersion (Manikandan, 2011).

Inter-quartile Range

  • The inter quartile range is the difference between the first and the third quartile.
  • The quartiles are used in the analyzing the data because the help to divide the data into three equal parts.
  • The first quartile is the number between the median and the smallest number in a set of data.
  • The second quartile is the median in a set of data.
  • The third quartile is the number between the median and the highest value in a set of data (Manikandan, 2011).

Percentile

  • Percentiles are used for analyzing the data because they provide optimization to the specific objective in an organization.
  • The first quartile is also called the 25th percentile, the second quartile is the 50th percentile and the third quartile is the 75th percentile (Manikandan, 2011).

Correlation Coefficient

Correlation Coefficient is used to determine the degree of strength and direction to which the two variables are associated with each other. If the value of Correlation is negative, then the relationship between the two variables is also negative. If the value is positive then the value is also positive. It the value of correlation is zero, then it implies that there is no relation between the two variables (Manikandan, 2011). The following formula is used to calculate the correlation:

Task 3

3.1 Graph

PRODUCT 2002 2003 2004 2005 2006
X 5 12 15 10 20
Y 8 15 10 15 15
Z 15 10 15 10 25

From the graph it is evident that the sales of product X have increased with the passage of years from 2002 to 2004. However, in the year 2005, the sales of product Y has declined but again it rose in 2006. The sales of Product Y have declined in the year 2004 but the sales rose in 2005 when the sales of product X was reduced. The sales of product Z has fluctuated for the five years. The sale of product Y was higher in the year 2006 and minimum in the year in 2003 and 2005.

3.2 Trend lines

Trend line is a very important instrument for forecasting the sales, profit, expenditure, income, revenue etc. of an organization.  The operations management of the organization relies on the R2 equation trend lying for proper forecasting. If the value of R2 is closer to 1, then the forecast is reliable and if the value is not closer to 1, then the forecast is not reliable.

Month Budgeted Sales(£’000) Delivery Cost (£)
July 50 340
August 150 400
September 550 700
October 560 650
November 650 760
December 710 750
January 750 800
February 900 900
March 470 600
April 350 450
May 250 500
June 80 330

The above graph is forecasting the budgeted sales of the company. But, unfortunately the trend line is unable to predict the sales for the next two months.  So in this case it can be said the value of R2 is not closer to 1 and so the forecast is not reliable.

In the above graph, the trend line is forecasting the delivery cost of the company. Since the value of R2 is not closer to 1, so the forecast is not reliable.

SALES AND DELIVERY COSTS
Months Budgeted Sales (£’000s) Delivery Cost £ Actual Sales £
July 50 340 70
August 150 400 120
September 550 700 600
October 560 650 560
November 650 760 600
December 710 750 740
January 750 800 720
February 900 900 800
March 470 600 550
April 350 450 450
May 250 500 240
June 80 330 100

The forecast of the actual sales is also not reliable. This is because the value of R2 is 0.0021 which is not closer to 1 and so the forecast is not reliable just as the forecast of the budgeted sales and the delivery cost.

3.4 Business Report

Introduction:The main aim of this report is to assess the relationship between the budgeted sales, actual cost and the delivery cost of an organization.

Findings: It is clearly visible in the above mentioned tables and the graphs that a particular trend cannot be estimated because of the volatile nature of gathered data. The budgeted sales cannot be forecasted. The relationship between the actual and the budgeted sales is also quite complex.

Mean 455.83 598.33 462.50
Median 510.00 625.00 555.00
Mode NA NA 600.00

Assignment Unit 6 Business Decision Making

Budgeted Sales (£’000s) Delivery Cost £ Actual Sales £
200.00% 17.65% 71.43%
266.67% 75.00% 400.00%
1.82% -7.14% -6.67%
16.07% 16.92% 7.14%
9.23% -1.32% 23.33%
5.63% 6.67% -2.70%
20.00% 12.50% 11.11%
-47.78% -33.33% -31.25%
-25.53% -25.00% -18.18%
-28.57% 11.11% -46.67%
-68.00% -34.00% -58.33%

Assignment Unit 6 Business Decision Making

Actual vs Budgeted % difference
40.00%
-20.00%
9.09%
0.00%
-7.69%
4.23%
-4.00%
-11.11%
17.02%
28.57%
-4.00%
25.00%
The variation ranges from -4.00 to 40.00 and as a result the management has not been able to project the sales with effective reliability. The trend lines also showed that the projects cannot be undertaken as the r2 equation represents that the forecast is not at all reliable. So the management has to reject the project.
  • Conclusion: So it is clear that the management will be rejecting the project and would need to start it after being able to develop the marketing strategies. They must reject the project at this moment of time.

Task 4

4.1Information tools

a) The four qualities of the management information of an organization are as follows:

  • Reliable: The information should be precise and correct and accurate as wrong information can mislead the management in undertaking wring decisions.
  • Understandable: The information that is delivered should be simple format so that the receiver is able to understand the data and format it in an effective manner.
  • Cost Effective: The information should not be expensive. It should be cost-effective. This is because it become meaningless if the cost of the solution becomes more than the problem. The cost of gathering and processing data should be assessed against the benefits it is offering.
  • Timely: The information should be provided at the right time in the procedure of decision making. Providing timely information is very important because it helps the organization in effective performance.

B) The information processing system is very essential as they help in proper transfer of knowledge and information within an organization in order to make effective decisions (Fao.org, 2014).

Transactional processing System (TPS): The transactional processing system is used in an organization in order to gather, upgrade and transfer as well as recover all the transactional data. The TPS needs an interaction of the user. This system deals with the data and concentrates on the current procedure of transaction in a markeing business organization. The TPS is developed in an organization with aim to enhancing the transaction process by increasing the speed, upgrading the efficiency and accuracy associated with other information system in an organization (techopedia.com, 2014).

Transnational processing System
Management Information System (MIS)

The MIS can be3 defined as a computer based system that aids the management of an organization to arrange, determine and efficiently manage departments by utilizing a wide range of tools. The MIS possess software for forecasting the future of an effective decision. The management information system should contain the following features:

  • Decision Support System
  • Hardware resource of a system
  • People management system
  • Project management application

The MIS is handled by the manager whose major concern is to focus on the technology and the information system of an organization. The MIS examines and monitors the issues associated with the business. After outlining the problem, a computer application is designed to to solve the problem of the organization.

Decision Support System

The data collected is scrutinized and examined with the help of Decision Support System.  The DSS provides the information graphically and may also include expert system or artificial intelligence. The DSS is utilized because they help to assess the current information about assets about rational data sources (nformationbuilders.com, 2011). They also help compare figure of sales between two weeks. The characteristic of DSS has been mentioned below;

Executive Information System

Executive Information System includes several kinds of software, hardware, process, data and people. This system is utilized by top level executives in undertaking proper decisions. This system helps in gathering data from the sources and helps in the incorporation and aggregation of the data. This system is widely used in the organization because they are very user friendly.

4.2 Critical path Analysis

  • Critical path: A>C>F>J>K= 31 days
  • Critical Path is used for preparing a schedule in the process of project management. They also help to analyze the success of a project. In case of any problem in the project, CPA provides remedial actions. CPA helps to schedule the time in which a particular project has to be finished. The CPA is a very essential tool for proper management of the project (Revisionworld.com, 2012).
  • Gnatt Chart: Gnatt chart is used to plan and schedule a project. They also help to track the time limit of a project. It is used to manage the task dependencies. They are used to highlight the multiple tasks in a single frame which helps the manager to understand it properly. It helps to sequence the events in a project and thus decline the work load. With this tool, the manager can make more focus on the effective decision for proper performance of the organization.
  • Pert: Pert chart is an effective instrument to manage as well as schedule the complex project. It is used for communicating the project information. However, the pert chart is often confusing. It shows the slack time which helps the managers in the process of resource allocation.  The Pert enables the managers to undertake proper planning by obtaining different kinds of information. They manager will also be able to assess which factor will affect the time factor of the project.

4.3   Investment Analysis

From the above calculation it is evident that the project B should be preferred over project A as it has a higher NPV and IRR. The calculation indicates the fact that project B has a higher NPV (19439>19080). A higher NPV means that the organization would be able to earn a higher return. IRR is the rate at which the cash inflows equal the cash outflow. Hence, if the IRR is greater than the cost of capital the project should be accepted and if the same is lower than the cost of capital the project should be rejected.  However, where all the projects have an IRR which is more than the cost of capital the project with the highest IRR should be accepted as the same would maximize the profits and returns of the concern. Considering the logic above project B should be accepted over project A (38%>35%).

Conclusion

The entire analysis showed that the company cannot launch the branch. This is because the forecast has proven to be negative. Thus it is important for the management of the organization to concentrate on the improvement and enhancement of the existing branch in London. After improving the efficiency of the current organization the management can launch another branch.



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