Unit 6 Business Decision Making Assignment - Wet Fish Cafe

 

Introduction

Business decision is considered to be very important for effectively running the business in proper manner. Both small and large business undertakes effective decision for their functioning. So in this Unit 6 Business Decision Making Assignment Wet Fish Café is considered for the various scenario by the use of statistical tools and chart. It is the accurate decision which is responsible for the smooth working of an organization. The Wet Fish Café is a medium sized coffee shop in the West Hampstead in north-west London. The café is famous for Americano. This is a strong and rich coffee but not bitter. Since there has been an increasing trend among the people regarding the coffee drinking, so the management of the organization has decided to launch a new coffee drink for their customers. For launching a new drink, the organization need to conduct a research in order to understand the taste, likings, preferences and attitude of the customers. This will help them to grasp an idea about the market size and structure. All these elements are very essential to make proper decision regarding launching a new product in the market. All these information can be gathered by the conducting a research.  The information will be gathered in the form of primary and secondary data which will have to be analyzed using several techniques. The analysis of the data is essential as it help the  business management  to undertake proper decision.

Task 1

LO1: A

Primary and Secondary Data

The collection of primary data is very essential in order to conduct a research. Primary data can be defined as the data which are gathered for the first time and so are in crude form. The primary data is acquired by the researcher himself with his strong effort(Burch, 1997). The collection of primary data can be lengthy procedure because it requires the preparation of a questionnaire and choosing proper sample frame. However, the collection of primary data is very essential because they help to acquire highly relevant data for the purpose of designing marketing strategy and undertaking effective decision.

The advantages of primary data are as follows:

• The data which is collected in the process of primary research is up-to-date. Thus primary data is considered to be a more effective instrument for decision making.   
• The collection of primary data helps to address the desired and targeted issues. The research for gathering primary data is streamlined as far as its purpose and scope is associated.
• The person who collects the primary data is the owner of that particular data and he need not share it with others and can keep it confidential (Vogt, 2010).
• The primary data can be interpreted in a more effective way. The data can be scrutinized and interpreted by the marketer based on their requirements.

Along with its several advantages, primary data also possess several disadvantages which are as follows:

• The collection of primary requires much time.
• Collection of primary data also is expensive.
• The primary data will lose its validity with the passage of time. 

          Figure.1: Advantages and Disadvantages of Primary Data

The primary data can be gathered from the following sources:

• Direct Personal observation
• Indirect oral interview
• Survey
• Experiments
• Focus groups

In the current scenario, the management of Wet Fish Café can conduct the primary research by organizing a survey on the selected population in West Hampstead. But, for organizing the survey, the management needs to prepare a survey methodology and choose a sample frame.

Survey Methodology and Sample frame

Survey can be defined as the process of carrying out an extensive research for the purpose of acquiring a wide range of response from the people. Survey methodology is the study of the sources that will create an adverse effect on the quality of the data collected in the survey. Thus, survey methodology highlights the guidelines and principles for planning, collecting, processing and analyzing the data. In order to conduct the survey in a very effective and efficient method and prevent any kind of bias of bias, a questionnaire has to be prepared. The questionnaire will consist of all the important questions that will be relevant to the purpose for which the survey is being carried out. For this reason, the management of Wet Fish Café has decided to conduct the survey by preparing a questionnaire(Lepkowski, 2008).  They will be using the questionnaire because of the following advantages:

• Questionnaire helps to gather standardized response and thus it is objective
• The responses obtained from the questions are highly structured and easily coded
• They also help to gather a wide range of response

However, there are certain negative aspects of questionnaire which are as follows:

• Open-ended questions can produce large amount of data which can time for processing
• It cannot explain the context and meaning behind a response

After preparing the questionnaire, the management of Wet Fish Café need choose a proper sample frame on which the research will be conducted. A sampling frame refers to the complete lists of all the individuals of the population on which the survey will be done(Leeuw, Hox and Dillman, 2008). The sampling frame helps to identify the sample population for the statistical treatment. The sampling frame is done because of the following advantages:

• They are very accurate
• Very reliable
• Consumes less time
• Economic system in business nature

The disadvantages of sampling frame are as follows:

• Inadequacy of the locusassignments./li>
• Chances of bias
• Unstrained manpower
• Possibility of errors in sampling 

In order to choose a sample frame it is very important to study the population.

                Figure.2: Sample Frame

The sampling can be done as simple random sampling, stratified sampling, cluster sampling, multistage sampling and quota sampling. In the given project, the management can conduct the survey in simple random sampling method on 100 people. The survey will be conducted inside the Wet Fish Cafe where all the people aged 14 and above will be allowed to present their view(Leeuw, Hox and Dillman, 2008).

Questionnaire: The management of Wet Fish Café can prepare the questionnaire which is mentioned below:

1. Gender:

• Male
• Female

2. Age group:

• 14-23
• 24-33
• 34-43
• 44 and above

3. How often do you drink coffee?

• Regularly
• Weekly
• Rarely

4. What kind of coffee do you prefer?

• Hot
• Cold

5. Which item of coffee do you like the most?

• Americano
• Espresso
• Cappuccino
• Caffe Latte

6. How much you spend on coffee every month in (£)?

• 11-20
• 21-30
• 31-40
• 41 and above

7. When you choose your coffee which factor you consider the most? (1-3 3 being most important)

	1	2	3
Price
Quality
Taste
Nutritional Value

8. Do you have brand fascination?

• Yes
• No

9. Do you like to have a new type of coffee?

• Yes
• No

10. Would you like to taste any of the following?

• Caf au Lait
• Caf Mocha
• Caramel Machiato
• Other: Specify

LO1: B

The collection of secondary data is also very essential in order to conduct the research in a very effective manner. The data which is gathered from already published source is called the secondary data (Ramavataram, 1996). The secondary data helps to make the collection of the primary data more efficient, accurate and precise. The advantages of secondary data are as follows:

• The collection of secondary requires less money and the procedure is quicker
• There are huge range of sources for secondary data collection
• The secondary data helps to delve deeply into the current trends

The disadvantages of the secondary data are as follows:

• There is a possibility that the secondary is outdated
• They can also be inappropriate
• The other rival companies can also possess the same data 

Figure.3: Advantages and Disadvantages of Secondary Data

The secondary data can be gathered from magazines, books, newspaper, journals, internet and government. The organization’s reports of sales, income, expenditure, and customers served and customers satisfied can also acts as a source of secondary data(Ramavataram, 1996). In the given scenario, the organization can review their records of sales and expenditure in order to know their current position. They can also explore the internet in order to derive idea about the different types of coffee that can be launched in order to attract the customers. The management of Wet Fish Café got the following mentioned secondary data:

Year	Advertisement Expenditure (£'000)	Sales of Americano (£'000)
2009	220	500
2010	238	540
2011	255	600
2012	250	630
2013	300	680

Task 2

Lo 2

Analysis of Data

The questionnaire has been to conduct the survey and collect primary data. The survey was conducted on 100 people in whom there were 35 male and the 65 female. The survey showed that majority of the people who comes to drink coffee are within the age group of 14-23 followed by the age group 24-33. The majority of the sample population drinks coffee regularly. The survey also revealed that 90% of the population preferred hot coffee. When the sample population was asked in the survey that what kind of coffee they preferred, 52% of the sample population mentioned that they prefer Americano which clearly highlights the popularity of their coffee drink. The management of Wet Fish also found out the majority people spends about £21-£45 in their coffee shop in a month(Call for papers computational statistics & data analysis, 1998).  When the sample population was asked what factor they consider while selecting coffee, maximum people put stress on quality followed by price and taste. 65% of the sample population said that they preferred brand while selecting coffee and the rest 35% said that they do not prefer brand while choosing a coffee.

The sample population was also asked if they like to have a new type of coffee, 98% of the population said that they will like to have new coffee and the rest said that they do not. The sample population was also asked that kind of coffee they would like to test. Majority of the sample frame gave their preference for Caf Mocha. The secondary data has also been collected for the sales and advertisement expenditure of the coffee shop. The advertisement expenditure from the year 2009-2013 is quite less as compared to the sales of Americano in Wet Fish Café.

Techniques used for data analysis

Average: Arithmetic Average is being used for the proper analysis of data. They help to identify the in which the store cluster in a set of data. There are basically three types of data which are as follows:

• Mean: Mean is the average of all the numbers present in a set of data. It is calculated by the finding the sum of all the numbers and then dividing it with the total number of scores.
• Median: Median can be defined as the number which lies in the middle in a set of data.
• Mode: Mode is the number which appears most frequently in a set of data.

Measures of Dispersion: Measures of dispersion are utilized in the business for the purpose of deriving an idea regarding the degree of dispersion or variation. The measures of dispersion are very essential for undertaking proper business decision (McClave, Dietrich and Sincich, 1997).

• Range: Range is the difference between the highest and the lowest value in a set of data.
• Standard Deviation: Standarddeviation is the square root of the variation. It takes into account all the variables in a set of data.
• Quartiles: Quartiles help to highlight the important indicators like sales, profit, income etc. of the business organization.

The number that lies between the median and the lower half of a set of data is called first quartile. It’s also called 25^th percentile. The number which lies in the middle is called the second quartile. It is also called the 50^th percentile. The number which lies between the median and the upper half of a set of data is called third quartile. It is also called 50^th percentile.

Correlation Coefficient: The strength and the direction of the relationship of two variables are determined by the correlation coefficient. It is a very powerful instrument for decision making by analyzing the data(McClave, Dietrich and Sincich, 1997). 

Calculation 

Advertisement Expenditure

Mean	261.8333333
Median	246.5
Mode	238
Quartile 1	238
Quartile 2	246.5
Quartile 3	288.75
Standard Deviation	39.42799344

Sales of Americano

Mean	616.6666667
Median	640
Mode	680
Quartile 1	555
Quartile 2	640
Quartile 3	680
Standard Deviation	83.3466656

Correlation Coefficient

Correlation Coefficient

0.765424996

The correlation coefficient is positive between the advertisement expenditure and sales. This means if the advertisement expenditure increases then the sales of the coffee will also increase.

Task 3

LO 3

1. Primary data 

Gender
Male	35
Female	65

In the survey, there were 65% female while the rest were male.

2.

Age Group	No. of people
14-23	40
24-33	35
34-43	20
44 & above	5

The majority of the people who visited the coffee shop for drinking coffee are in the age group of 14-23 and 24-33. So while launching the new coffee, the management can target these two age groups.

3. Frequency of Drinking

Regularly	55
Weekly	40
Rarely	5

The survey showed that most of the people drink coffee regularly.  So launching a new coffee will increase their daily sales.

4.  Types of Coffee

Hot	90
Cold	10

The above graph shows that majority of the sample frame preferred hot coffee. The management should take account of this while launching a new coffee.   

5. Kinds of Coffee

Americano	52
Espresso	23
Cappuccino	15
Caffee Latte	10

The above graph shows that Americano of the café is quite famous and this is followed by Espresso. 

6.  Expenditure

Spending (£)	No. of people
11-20	35
21-30	45
31-40	15
41 & above	5

The above histogram exhibits that majority of the people spend £21-£30 per month in a coffee shop. The management has to keep this mind while launching the new coffee as it will help them to set the price of the drink(Kendall et al., 1994).

7. Rating 

Factors		Ratings
	1	2	3
Price	25	40	35
Quality	15	40	45
Taste	20	50	30
Nutrition Value	40	45	15

The above graph shows that majority of the people gave their preference for quality as compared to the other factors. Yes, price is also an important factor for selecting their coffee. Thus, while launching the new coffee, the management should consider the quality and the price as the most important factor.

8.  Brand fascination

Yes	65
No	35

The above graph is showing that majority of the people has brand fascination.

9. Acceptance

Yes	98
No	2

This clearly shows that majority of the population gave their preference to try a new type of coffee.

10. New Coffee

CafauLait	40
Caf Mocha	45
Caramel Machaito	12
Others	3

It is evident in the graph that majority of the sample frame gave their preference for Caf Mocha. So the management of Wet Fish Café can launch Caf Mocha in their shop.

Secondary data

Expenditure

The  advertisement and promotion  expenditure of the company was rising steadily but it declined in the year 2012. However, the expenditure again started rising in the 2013 and 2014.

Sales

Unlike expenditure, the sales of the company have increased with the passage of years.

Trend lines

The trend line is a very important tool for forecasting the sales, expenditure, profit and income of the business. The R2 equation in the trend line is important. If the value of R2 is closer to 1, then the forecast will be reliable(Kendall et al., 1994).

The above trend line is forecasting the advertisement expenditure of Wet Fish Café. The graph is showing that the expenditure will increase in the year 2015 and 2016. The R2 equation is closer to 1 and so the forecast is reliable.  

Business Report

Aim: The management wants to launch a new coffee drink

Objective:

• Gathering information about the customer preference and attitudes regarding coffee drink
• Developing an idea about the market structure of Wet Fish Café

In order to fulfill the aims and the objectives, a survey has been carried out to gather the primary and the secondary data. The collected data has been analyzed with the help of the different techniques like representative values, measures of dispersion and correlation coefficient. For better analysis and explanation, graphs have been created(Kendall et al., 1994). The trend lines helped the management of the organization to forecasting their advertisement expenditure.

Conclusion; The entire project helped the management to undertake proper plan to launch a new coffee by analyzing the data. The management can launch a new coffee as is evident in the analysis but it had to consider all the facts that are important while developing their new drink.

Task 4

Lo 4

Project plan: For launching a new coffee it is very important for the management of the organization to create a proper project plan.  If there is a little bit of error in the process of planning, then it can lead to the failure of the product in the market(Sellars, 2009). The management of Wet Fish Café can follow the steps in order to develop their new product:

• Creation of the idea: It is very important to develop an idea regarding how to start a new coffee to the existing product line. This is done by SWOT, PESTEL analysis etc.  
• Screening: The ideas that are created are properly screened and filtered in this stage by considering several criteria.
• Developing Concept: The selected ideas are presented before the customers to observe their reaction to see whether the idea is desirable or not.
• Developing product: Sample of the product is created and presented to the customers to see if it requires some changes.
• Release: The product is finally launched in the market and several kinds of promotional activities are undertaken to make it popular among the customers.

Information processing Tools: The management of Wet Fish Café can use the following information processing tools in their organization:

• Accounting Information System: This tool aids the  managing financial department of an organization to undertake proper plans by providing reports on statistical data and information on financial accounts(Sellars, 2009). 
• Business process Mapping: This system helps the management to understand what the responsibility of the business is and to what standard a business project should be completed and the performance can be determined and assessed.
• Critical Path: The project completion time can be analyzed with the help of the critical path method. For the launch of the new coffee the critical path of the project would be as follows:

Paths	Paths duration
ACFJ	15
ADGJ	20
AEHIJ	32
BHIJ	17

The critical path of this activity is AEHIJ and the maximum time to complete this project is 32.

Financial Tools: The following financial tools can be used which are as follows:

• Net Present Value: The NPV can be defined as the difference between the present value of future cash flow from an investment and the amount of the investment. The net present value is very important as they help the management to decide that whether the project is desirable or not.
• Internal Rate of Return: IRR is that discount rate at which the project net present value of all the cash flow is zero. If the value of IRR is greater than the opportunity cost of capital, then the project can be accepted by the management.  

Year	A	B	DCF@10%	DCF A	DCF B
	(700,000.00)	(700,000.00)	1.00	(700,000.00)	(700,000.00)
1	206,940.00	135,375.00	0.91	188,127.27	123,068.18
2	207,460.00	135,375.00	0.83	171,454.55	111,880.17
3	224,597.00	185,375.00	0.75	168,743.05	139,274.98
4	188,496.00	235,375.00	0.68	128,745.30	160,764.29
5	86,174.00	225,375.00	0.62	53,507.27	139,940.14
5	63,294.00	25,375.00	0.62	39,300.59	15,755.88
				49,878.04	(9,316.36)
NPV	49,878.04	(9,316.36)
IRR	13%	9%
ARR	26.10%	26.20%

In the above table the cash flow of both the projects have been used to analyze the NPV and the IRR. The ARR of the project has also been calculated without taking into account the discounting factor(Dayanada, 2002). From the above calculation we can come to the conclusion that the project A should be chosen over project B as it has a higher NPV and IRR. Though the ARR of project is higher the same is will not be considered as IRR and NPV are better methods of investment appraisal.

Conclusion

The project helped to understand that how effective decision making is essential for proper working of the organization. Unit 6 Business Decision Making Assignment Wet Fish Cafe is very essential for deriving idea about the market structure for launching new products. The analysis of the data and forecasting has further helped the management in process of decision making. In order to make plans for developing new product, the management has to utilize several tools that will guide them to undertake proper plans.

References

Burch, H. (1997). Selected primary & secondary education data. Annapolis, MD: Dept. of Fiscal Services.
Call for papers computational statistics & data analysis. (1998). Computational Statistics & Data Analysis, 27(1), p.117.
Dayanada, D. (2002). Capital budgeting. Cambridge, UK: Cambridge University Press.
Kendall, M., Stuart, A., Ord, J., Arnold, S. and O'Hagan, A. (1994). Kendall's advanced theory of statistics. London: Edward Arnold.
Leeuw, E., Hox, J. and Dillman, D. (2008). International handbook of survey methodology. New York: Lawrence Erlbaum Associates.
Lepkowski, J. (2008). Advances in telephone survey methodology. Hoboken, NJ: John Wiley & Sons.
McClave, J., Dietrich, F. and Sincich, T. (1997). Statistics. Upper Saddle River, N.J.: Prentice Hall.
Ramavataram, S. (1996). Secondary Sources. Nuclear Data Sheets, 79(4), pp.997-1015.
Sellars, D. (2009). Business plan project. [New York, N.Y.] (222 East 46th Street, New York, NY 10017): Business Expert Press.
Vogt, W. (2010). Data collection. Los Angeles: SAGE

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