Business Decision Making Assignment (July 2015) (2)

BUSINESS DECISION MAKING

Name: Mrs Shermae Murraine Student Number: 10482 Batch: KB2 Lecturer: Mr Emmanuel B Ofori

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Table of Contents Introduction ……………………………………………………………………………..…. ………………3 P1 Using a variety of sources for the collection of data, both primary and secondary P1.1 The collection of primary and secondary data of the behavior and attitude of consumers towards food discount retailing in London ……….……………..………………………..... 4 P1.2 Survey methodology and sampling frame used for a survey into the behavior of attitude of consumers ………………………………………….……………………………………..5 P1.3 Questionnaire design for a survey into consumer attitude and behavior ………….…. 6-7 P2 Been able to understand a range of techniques used to analyse data effectively for business purposes P2.1 Summarize data using representative values from data obtained to create information for decision making ……………………………………………………………………..…...…8 P2.2 To draw valid conclusions for WM Morrison Supermarket Plc and analyse the results ……………………………………………………………..……………………......…….9-10 P2.3 Use measures of dispersion to inform Morrison’s by analyzing the data ………….11-12 P3 Been able to produce information in appropriate formats for decision making in the organizational context P3.1 Using graphs and spreadsheets, draw valid conclusions based on the information derived from the scenario ………………………………………..…………………………………..13 P3.2 Use trendlines in spreadsheet, graphs to help to forecast sales revenue for WM Morrison, J Sainsbury, Lidl and Aldi …………….....…...……………………….……...…. 14 P3.3 Business presentation using appropriate software and techniques to disseminate effectively …………………………………………………………………………………... 15 P4 Be able to use software generated information to make decisions in an organization P4.1 The appropriate use of information processing tools for operational, tactical and strategic level decisions at WM Morrison Supermarkets Plc …….…….……………..……. 16

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INTRODUCTION

In order to make good decisions in business, the use of information should be effective. In business decision making an insight is given into the various sources of data collection both primary and secondary that can be used. It also enables one to develop techniques that can be used in relation to the collecting of data, how to store it and the effective tools that are available to create and make your work presentable. Business decision making also encourages the use of different software packages like Microsoft word, Power Point and Excel to complete given tasks. In this report I will be using different methods to analyse data and present results. Through this unit I have gained a lot of knowledge in ICT and has developed an appreciation for it. Information systems in this topic are used in organisations at all levels to help in decision making. This has provided opportunities to develop different techniques into the gathering, storing and understanding of tools readily available to me for the creating and presenting of useful information to support business decision making/so business decisions can be made. The aims and objectives of this report is provide an understanding of a variety of sources for collecting primary and secondary data, using a range pf techniques to analyse data effectively for the purposes of businesses, producing information in different formats that are appropriate for decision making in context to organisations. For this report software generated information is also used for decision making in organisations and the factors impacting decision making in groups or individually.

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P1.1 Create a plan for the collection of primary and secondary data of consumer behaviour and attitudes towards food discount retailing in Greater London. Data collection is anything that conveys a meaning. This means that when data is coded it gives information and when used it gives knowledge. Data can be collected in two ways: (i)

Primary data which is the information received directly from the source. It is data collected specifically for a particular purpose for example – information provided from questionnaires or one-to-one interviews.

Whereas; (ii)

Secondary data are ones that have already been collected by other people for example information available in journals, websites

For my data collection I will be considering both quantitative information and qualitative data as this will enable me to collect numerical and descriptive data.

PLAN FOR DATA COLLECTION

Primary Data Examples of primary data I can use would be questionnaires, surveys, through the post or interviewing customers on a one-to-one basis. I will carry this out, outside the Morrison’s in my local area, as this will enable me to collect information directly from the customers. I will aim to interview 30 people minimum all over the age of 18+.

Secondary Data This data will be collected through the use of journals, books, research reports and internal records of Morrison’s, using information such as the feedback of customers, reports made by others through research, any possible complaints made by customers, loyalty store cards as it has/possess information about the customers.

P1.2 Present the survey methodology and sampling frame used for a survey into consumer behaviour and attitudes towards food discount retailing in Greater London.

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Survey methodology is a method of investigation that uses questions or statistical surveys to collect information based on the way people think or act’ (businessdictionary, 2015). Peter Drucker (1964), suggests that the importance of using methodology is that ‘knowledge organised in a discipline does a good deal for the merely competent; it endows him with some effectiveness. It does infinitely more for the truly able; it endows him with excellence’. And yet at the same time, he cautions ‘no book will ever make a wise man out of a donkey or a genius out of an incompetent’. Survey methodologies are usually carried out for different purposes; it is a structure that gives guidance on what to do, and when to do it, a definition of techniques to do what needs to be done, give advice on how to manage the quality of results and the tools needed to automate the process. For these purposes a methodology can always use alternative techniques to achieve the overall aim and tools needed to support these techniques within an organisation. For this report it will be made up of both qualitative and quantitative research methodologies; as data will be numerical and some descriptive. Although sampling frames can be used in numerous ways like random sampling, simple random sampling, systematic sampling, stratified sampling, quota sampling and cluster sampling to meet specific targets. For the purpose of this assignment I will be using cluster sampling because it is more efficient for the type of survey I am carrying out and the way my data has been collected. Sampling involves the selection of a sample of items from a population. Sampling is important when quantitative methods are been used. As it is a large population when it comes to carrying out a complete survey for my assignment a sample of people from the age of 18 and over in the local Morrison’s will be used both working class and non-workers.

P1.3 QUESTIONNAIRE This questionnaire was designed to find out about consumers behaviour and attitude towards Morrison’s.

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Under what age range do you fall? Please tick one of the following. 18-20  21-30  31-40  41-50 51-60  61+ On average how much do you spend on a weekly, quarterly or monthly basis? £0-£100 £101-£200 £201-£300 £301-£400 £401-£500 £501+ How do you feel about the service provided at Morrison’s? Very satisfied 

Satisfied 

Partly satisfied 

Not satisfied at all 

The discounts given by Morrison’s does it suit your needs? Yes  No  Explain____________________________________________________________________ __________________________________________________________________________ Are the discounts useful towards the contribution of your daily, weekly or monthly shopping? Yes No Explain____________________________________________________________________ ___________________________________________________________________________ How long have you been shopping at Morrison’s and why? ___________________________________________________________________________ How would you rate Morrison, in comparison to Asda, Sainsbury or Tesco? On a scale of 1(worst) to 10(better).  1 2 3 4 5 6 7 8 9 10 Are you happy with the products provided by Morrison? On a scale of 1(not happy) to 5 (very happy). 1

2

3

4

5

Do you think it is good value for money? Yes Do you own a loyalty store card? Yes

No

No

Do you like to buy your meat products at Morrison’s Yes No. Do you feel that you get a better quality? Yes No. Explain______________________________________________ ___________________________________________________________________________ Is it more economical to shop at Morrison? Yes

No

In all fairness how would you compare Morrison’s value brand to that of other brand. Choose one of the ratings. 1 2 3 4 5

P2.1 Create information for decision making by summarizing data using representative values (arithmetic mean, median and mode) using the data obtained from the survey into consumer behaviour and attitudes towards food discount retailing.

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Mean – is the total sum of the observations divided by the number of observations. Mode – is an average that indicates the most frequent occurring value Median – is the value of the middle member of distribution once all the items have been arranged in order of magnitude. Average spent Midin house hold

House House

Point Holds

Holds

(x)

(f)

(fx)

0 < 100

50

12

600

101< 200

151

5

753

201< 300

251

1

251

301 < 400

351

2

701

401 < 500

451

1

451

501+

0 2754

Then X =

=2754.5

= 137.725 = Approximately 138

20 Based on my observations it clearly shows that the average spending in households at Morrison on a weekly, quarterly or monthly basis is £0-£100. This suggests that it may not be affordable as the prices might be too high so it restricts how much consumers spend on average for example some explanations given by customers were ‘I am in part-time work’, ‘my income is low etc. The products needed may not be available so they end up buying only what is. I will suggest to management of Morrison could carry out a survey to gather information to see products that are most needed or products bought and make this more available for customers. Management can also monitor the products more closely so products are in the right place at the right time. Morrison needs to also consider what customers they attract for example the age group, working or non-working class, or the ones only seeking bargains at a particular times. *Looking at the results the people surveyed at Morrison is living within the means of approximately about £138 from weekly to monthly on average. I will suggest that for Morrison to move forward in meeting the needs of their customers they need to assess the spending habits of the people they attract into the store and see what can be done to meet the needs of the people, to make sure whether or not this is all they can afford, are the prices too high for them, what class of people dominate the circular in which they are operating in based on culture and the environment in which they are operating in. The median of group data Average spent Mid-

(fx)

CF

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In house hold

Point Household (x)

(f)

1 < 100

50

12

600

12

101 < 200

151

5

753

17

201 < 300

251

1

251

18

301 < 400

351

2

701

20

401 < 500

451

1

451

21

21

2756

501 >

Median = L + (n/2 – f /f) x i = 1 + 21/2 – 0 / 12 = 11/12 x 100 = 91.66

P2.2 Analyse the results to draw valid conclusions for Wm Morrison Supermarkets Plc Looking at the results obtained in 2.1 Morrison can use these as a guideline into how they position products into the market. Morrison need to consider the needs of customers coming

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into their stores by thinking about the quality of their products in the market. They need to consider the needs of customers coming into their stores by thinking about the quality of products they bring into the stores, the types of products and how they price these/their products because pricing products too high can make products unaffordable to customers pushing them to go to a different stores for example Poundland or Asda where the products are cheaper, creating losses for them, products needed may not be available to them pushing them to also go elsewhere. Morrison can also make good use of results to categorise or target their customers for example Morrison offers loyalty/store cards to customers, they can check the spending habits of consumers through this and they can bring in products that suits the needs of their customers.

P2.3 Analyse data using measures of dispersion to inform Morrison (standard deviations)

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P2.4 Explain how quartiles, percentiles and the correlation coefficient are used to draw useful conclusions in a business context ‘Quantiles is a collective term for quartiles, deciles, and percentiles and any other dividing point for analysing frequency distribution’ (Bpp learning media, 2013). ‘Percentile is where the data set is arranged in ascending and descending order, the pth percentile is a number such that p% of the observations of the data fall below and (100-p)% of the observations fall above it’ (Bpp learning media, 2013).

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Correlation are ‘variables said to be correlated when the value of one variable is related to the value of another’ (Bpp learning media, 2013). Coefficient of correlation ‘measures the degree of correlation between two variables’ (Bpp Learning media, 2013). If Morrison trains their staff/employees this will make the staff more skilled which causes production to be increased. If production increases sales will also increase and the revenue will also increase making more profits for Morrison’s. If the cost of production is low, Morrison will then be able to produce more. Morrison produces their own brand products for e.g. as this will cost them less to produce compare to purchasing and selling other brands. As production increases for them cost also reduces (economy of scale). If resources are allocated efficiently and effectively it saves them administratively for example by having the right staff in the right places and they are able to manage costs across the departments, this can increase productivity. However, if one department is overstaff and another area is lacking staff this can create room for diseconomy of scale (see diagram below). Morrison can buy their fresh fruits in bigger quantities than from a small supplier of vegetable and fruit as this reduces the cost per unit and it enables them to buy in bulks and achieve discounts through purchases (See the diagram below).

On the other hand, if the staff at Morrison’s motivation is low it creates potential for diseconomy of scale internally as it results in low productivity. The productivity per employee also reduces. It is very easy for a big supermarket like Morrison they can suffer poor communication if they are not careful as they might find it difficult to maintain the effectiveness of informing

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departments, divisions between their head offices. Time also have a big part to play in the dissemination of information because if time is not created or given problems will occur in regards to how quick responses are being made in accordance to the change of market conditions.

P3.1 Produce graphs using spreadsheets and draw valid conclusions based on the information derived from primary and secondary data

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P3.2 Create trend lines in spreadsheet graphs to assist in forecasting sales revenue for WM Morrison’s, Sainsbury’s, Lidl Ltd and Aldi given in the business scenario

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The graphs above show that all four supermarkets have made significant profit. However, due to the market of the discount retailers the two main ones Sainsbury and Morrison even though profit is been made the margins have decreased. Aldi however, is holding strong in the middle ground. They have made progress in the year 2012-2013.

P3.3 Prepare a business presentation using suitable software and techniques to disseminate information effectively In a competitive market like the one Morrison is operating in it is important for them to keep get information across to their stakeholders effectively. Morrison can distribute information in various ways, through software like face book, twitter, Instagram etc. as this is cost effective as it is cheaper and more accessible way of getting across to people both existing and new and people are getting up dated on a regular basis. It is also a way for Morrison to keep up with change and to persuade customers because they need to keep them informed.

Before Morrison’s can disseminate information to its stakeholders they need to be aware of what they want to achieve have an understanding of this to then know what actions they are going to take. Morrison uses dissemination to target stakeholders like customers that do not need a lot of knowledge but needs to be aware of the activities and outcomes. As they are aware that stakeholders, shareholders, creditors etc. will benefit from this information. The one receiving the information also needs to have a clear understanding (of its purpose).

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Morrison also uses this to influence the ones in positions and to bring about change for e.g. by equipping staff with the right skills, knowledge and understanding needed to achieve results in accordance to change. In order for Morrison to be successful, they need to embrace everyone; employee, customers, managers, suppliers, creditors, government etc. The following are some of the different types of dissemination media that Morrison’s might consider using: Mailing list as this gives people access to materials and information about them for example through brochures and leaflets. Emails as this is a very effective way for Morrison’s to communicate with the market (that of its target market). Morrison uses newsletters and this is sent out every quarter to the local community to inform people of their progress for example and to stimulate their interests. This method can be costly so it needs to be well presented. Morrison also uses websites as this is easily accessible for information about them; as long as the targeted market are aware of it. It also needs to be interesting so people will visit it. Once these audiences are attracted to the website Morrison needs to continuously find ways to ensure that they visit regularly. Morrison needs to keep their website updated and flagging up things of interest on their home page that users can immediately see when new things are added. The media is a technique also used by Morrison as it increases their publicity nationally or locally as it reaches a whole vast of people. Another advantage is that by holding a loyalty card with Morrison, discount promotions, offers and deals are sent to you as a customer via email or through brochures with money-off coupons attached this encourages as well as inform customers of special offers or an incentive to come and shop which provides an opportunity to go in, look around and see what they have to offer.

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P3.4 Produce a formal business report for Wm Morrison Plc on the threat of discounted food retailers and how it can respond to the threat. BUSINESS REPORT To: The Management of Morrison Plc From: Business Consultant Subject: Report on the threats to Morrison and how to respond to these threats Date: May 19th 2015 EXECUTIVE SUMMARY The discounted food retail market is highly competitive because of the dynamic environment in which it operates as businesses. It is extremely important therefore for the management team at/of Morrison to create a plan which they can strategically follow to respond to the threats in the environment in which it operates. The intention for this report is to outline the threats faced by Morrison Plc in the United Kingdom in which possible suggestions will be made to tackle these threats. There are various ways in which Morrison Plc can respond to threats in the market they are operating in. Before anything can be done Morrison needs to recognise that their response to

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threats is correlated to the attitudes and behaviours of customers as this is vital. In order to do this they need to be familiar with the reaction of customers to each response. Morrison can employ some of the response strategies below (to improve their services to consumers). They can use pricing strategies as they have introduced ‘I’m cheaper – everyday low prices’ (Morrison case study) as it is greater for shoppers. Morrison faces threats from rivals as they may also do the same but Morrison can deal with this threat by been ahead of rivals and remaining consistent with price change (good quality at a cheaper price.)

Product differentiation strategies Although Morrison is competing with Tesco, Asda and Sainsbury

Diversification strategies

P4.1 Use appropriate information processing tools for operational, tactical and strategic level decisions at WM Morrison Supermarkets Plc In an ever changing business environment like the one Morrison is operating in, the use of Management Information Systems are essential to Morrison to help them to keep up with the everyday, constant demands of the consumers. MIS is the system where information is provided to many businesses for the effectiveness of decision making using minimum time. MIS is unique in the sense that the information differs from that of other information systems used. Morrison uses MIS to enhance the way in which things are done. It is used for the storing, analysing and facilitating the strategic, tactical and operational activities of Morrison Plc. The level of management in Morrison is split into three levels; strategic level, business level and functional level just like any other business and each level contributes to the decisions whether it bears a positive or negative impact on them. At the strategic level are the CEO, Director of Morrison are the decision makers At the business level are the managers contributes to the decision making and also to see that policies are implemented At the operational level are store assistants, junior staff at this level they implement strategies given by the managers

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P4.2 Prepare a plan for the activity and determine the critical path for WM Morrison Plc using the information given below. The end result of the feasibility project will be a report recommending the action to be taken for the new product development. The activities to be carried out to complete the feasibility project are as follows

Activity Description

Immediate

Expected time Number of staff

predecessors A

Preliminary

required

Nil

5

3

Design B

Market research

Nil

3

2

C

Obtain

A

2

2

A

5

5

A

3

3

Engineering Quotes D

Construct Prototype

E

Prepare

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Marketing Material F

Costing

C

2

2

G

Product testing

D

4

5

H

Pilot survey

B,E

6

4

I

Pricing estimates H

2

1

J

Final report

6

2

F,G,I

5

1

7

4

2

3

6

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8

P4.3 Use the financial tools (such as NPV, IRR) for decision making using the information given Project A Year

Cash Flow Discounting Factor Present Value (£’000)

DF @ 10%

FV x DF (£’000)

0

(500)

1.000

(500)

1

100

0.909

90.90

2

200

1.736

347.2

3

400

2.487

994.8

4

300

3.170

951

5

200

3.791

758.2 +2642.1

The Net Present Value of the project is £2642.1. This means that the project is worthwhile or viable. This also means that the management of Morrison could go ahead with the project by the first principle, the decision is that if NPV>0, then the project is viable since the NPV=2642.1. However, it is at the discretion of the management of Morrison to go ahead with this project or not but if he/she decides to go for NPV the time value of money is considered and there is a complete measure of return. (NPV is positive so the project can go ahead as it is a profitable one) NPV as a financial tool gives management time value of money, the years in which the project will last, it informs shareholders if they are making money or not and it allows managers to set higher discount rates for projects that are more risky. However, NPV can’t be easily explained to managers and the cost of capital is always required.

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Project B Year

Net Cash Flow Discounting Factor Present Value (£’000)

DF @ 10%

FV x DF (£’000)

0

(500)

1.000

(500)

1

50

0.909

45.45

2

150

1.736

260.4

3

300

2.487

746.1

4

400

3.170

1268

5

300

3.791

1137.3 +2957.25

ARR Method of Appraisal Project B requires an initial investment of £500,000 Average inflow (£’000) 50+150+300+400+300 = £1,200 Initial £1,200,000 Less expense (500,000) = £700,000 Net Profit for 5 years = £700,000/5 = £140,000 Average Profit per annum = £140,000 So ROCE = Average Annual Profit x 100% = 140,000 x 100% = 28% Initial investment

500,000

Initial cost was 10% and the return is 28%. Since the returns of 28% exceeds the cost of capital of 10% the project can be accepted.

Payback Method of Appraisal for Project A

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Year

Cash Flow Cumulative (£’000)

Cash Flow (£’000)

0

(500)

(500)

1

100

(400)

2

200

(200)

3

400

4

300

5

200

Payback Method of Appraisal for Project B Project Amount = £500,000 Annual cash flows = 50+150+300+400+300 = £1,200,000 Year

Cash Flow Cumulative Cash Flow (£’000)

(£’000)

0

(500)

(500)

1

50

(450)

2

150

(300)

3

300

4

400

5

300

The payback period for Project B is 3 years

REFERENCES

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BPP Learning Media; Business Essentials (supporting HND and foundation) Business Decision Making, July 2013 edition Robson, W. (1997) Strategic Management & Information Systems (2nd edn), Financial Times Pitman Publishing, p.175.

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