2.1. Functional area #1: Marketing Management and Decision Making
Analysis of the starting conditions (based on the running case and the objectives of the owner)
Targeted characteristics for the first three years of operations of the new business unit
Application of the business simulation (for the selected functional area)
Our store is called Legal Harborside which is a three-floor restaurant serving legal seafoods. Now we are deciding to invest in the New BrewPub which could serve our customers with self-made Brew beer. The objective of investing in a New BrewPub is to increase the variety of our products and add one more profitable point into our restaurant.
The reason why we choose self-made brew beer is that recently, the demand for self-made brew beer is dramatically increasing in recent years. The demand of self-made brew even surpassed that of soda in summer 2018 in the whole Boston area (1). According to a research public by Columbia University, the BrewPub has become the 7th influencer that may affect customers coming to a restaurant or not, from 23rd in 2016. We think this reflect the preference of drinks of our customers has changed and we need to correspond to those changes and make use of the change to increase our revenue.
(1)
Before we start investing, we conduct a series of marketing analysis to evaluate the market of the self-made brew beer. The analysis of demand of Drinks in Boston is conducted with a survey delivering to residents in Boston area by a random sampling method. Therefore, it can represent the percent of self-made brew beer demand. Currently, the restaurant offering self-made brew beer is only 5% so there is an imbalance between the supply and the demand. In the radius of 5 miles around Legal Harborside, there are only 27 restaurant severing self-made brew beer, which can meet the demand of Among those who reporting the wants self-made brew beer, it has been reported that 62% of them may only consider the restaurant that has self-made brew beer. Offering self-made brew beer may turn to be one important advantage of a restaurant to attract more customers and start to be a requirement for a successful restaurant. These results show that self-made brew beer is worthy of investing.
3.1 please write this part!!!!!
SWOT Analysis
Strength
· Craft beer trend is growing
· Craft beers complement variation menus in the restaurant
· High quality for reasonable price
· High margins
·
Weakness
· Complication and risk of quality control
· Consistency of craft beers quality
·
Opportunity
· Sport & Music Festival marketing
· Boston craft beer culture
· Target customer (a lot of students in the area)
·
Thread
· City Tap House (100+ craft beer)
· Low barrier
· Winter/Snow inconvenience to travel/eat out
Question 4 DataHouse SalesRegionTypeSelling PriceLot CostMidwestTownhouse$85,145$17,030MidwestTownhouse$112,740$20,700MidwestTownhouse$115,350$18,030MidwestTownhouse$116,415$19,600MidwestTownhouse$133,070$2.
2.1. Functional area #1 Marketing Management and Decision Making .docx
1. 2.1. Functional area #1: Marketing Management and Decision
Making
and the objectives of the owner)
of the new business unit
functional area)
Our store is called Legal Harborside which is a three-floor
restaurant serving legal seafoods. Now we are deciding to invest
in the New BrewPub which could serve our customers with self-
made Brew beer. The objective of investing in a New BrewPub
is to increase the variety of our products and add one more
profitable point into our restaurant.
The reason why we choose self-made brew beer is that recently,
the demand for self-made brew beer is dramatically increasing
in recent years. The demand of self-made brew even surpassed
that of soda in summer 2018 in the whole Boston area (1).
According to a research public by Columbia University, the
BrewPub has become the 7th influencer that may affect
customers coming to a restaurant or not, from 23rd in 2016. We
think this reflect the preference of drinks of our customers has
changed and we need to correspond to those changes and make
use of the change to increase our revenue.
(1)
Before we start investing, we conduct a series of marketing
analysis to evaluate the market of the self-made brew beer. The
analysis of demand of Drinks in Boston is conducted with a
survey delivering to residents in Boston area by a random
sampling method. Therefore, it can represent the percent of self-
made brew beer demand. Currently, the restaurant offering self-
made brew beer is only 5% so there is an imbalance between the
supply and the demand. In the radius of 5 miles around Legal
2. Harborside, there are only 27 restaurant severing self-made
brew beer, which can meet the demand of Among those who
reporting the wants self-made brew beer, it has been reported
that 62% of them may only consider the restaurant that has self-
made brew beer. Offering self-made brew beer may turn to be
one important advantage of a restaurant to attract more
customers and start to be a requirement for a successful
restaurant. These results show that self-made brew beer is
worthy of investing.
3.1 please write this part!!!!!
SWOT Analysis
Strength
· Craft beer trend is growing
· Craft beers complement variation menus in the restaurant
· High quality for reasonable price
· High margins
·
Weakness
· Complication and risk of quality control
· Consistency of craft beers quality
·
Opportunity
· Sport & Music Festival marketing
· Boston craft beer culture
· Target customer (a lot of students in the area)
·
Thread
· City Tap House (100+ craft beer)
· Low barrier
· Winter/Snow inconvenience to travel/eat out
8. Jaguars
25.7357.4149.4208313.8100.3213.5765942010813Kansas City
Chiefs 14.1276.878198.8319.4130.6188.91016971482013Miami
Dolphins
16.7287.598.1189.4342.2153.5188.7917321481613Minnesota
Vikings
22.8336.2164.6171.6338.174.1264.18666215161416New
England Patriots
36.8411.2115.6295.7288.398.3190.178690191296New Orleans
Saints 23.7361.291.6269.6348.1102.9245.36858113101812New
York Giants
23.3331.4134.3197.130597.7207.37765215102014New York
Jets 16.8294.7106.3188.4331.9134.8197.163486156196Oakland
Raiders
17.7294.8130.4164.4341.6145.9195.81208641882017Philadelph
ia Eagles
21358.1123.4234.7311.495.8215.6836491181512Pittsburgh
Steelers 24.6327.4135.5191.9266.489.9176.5806511114148San
Diego Chargers
25.8315.2127.4187.8320.3107213.3947613018168San Francisco
49ers 13.7237.392.3145346.2118.5227.79770212101717Seattle
Seahawks
24.6348.9101.2247.8321.8102.8219.15942820141311St. Louis
Rams 16.4297.595.4202.1341.1115.3225.894794189289Tampa
Bay Buccaneers
20.9326.8117209.8278.4107.9170.5816141619812Tennessee
Titans
18.8311.7131.8179.9291.692.4199.210177322121717Washingto
n Redskins 20.9333.4116.9216.4305.391.32149075114101118
Q 1: Spreadsheet Modeling
A stockbroker calls on potential clients from referrals. For each
call, there is a 10% chance that the client will decide to invest
with the firm. Fifty-five percent of those interested are found
not to be qualified, based on the brokerage firm’s screening
criteria. The remaining are qualified. Of these, half will invest
9. an average of $5,000, 25% will invest an average of $20,000,
15% will invest an average of $50,000, and the remainder will
invest $100,000. The commission schedule is as follows:
Transaction Amount
Commission
Up to $25,000
$50 + 0.5% of the amount
$25,001 to $50,000
$75+0.4% of the amount
$50,001 to $100,000
$125+0.3% of the amount
a) What is the expected commission based on making 600 calls?
b) How will the commission change when the number of calls
change? (Hint: use a data table)
2: Spreadsheet Modeling
You operate a luxury hotel that famous celebrities rent for
extended periods. The daily price is per room is $1,950.
Operating costs average $60,000 per day, regardless of the
number of rooms rented. Construct a spreadsheet model to
determine the profit if 60 rooms are rented. The manager has
observed that the number of rooms rented during any given day
varies between 50 and 80 (the total number of rooms available).
a) Use data tables to evaluate the profit for this range of unit
rentals.
b) Suppose the manager is considering lowering or increasing
the daily price by $100. How will profit be affected? (Hint: use
a two-way data table).
Q3: Linear Optimization
OPRE 605.7BE Inc,, has three flagship products: Absolute Sling
Chairs, Awesome Tables, and Unbeatable Hammocks. The unit
profit for these products is $45, $90, and $95, respectively.
10. Each type of product requires manufacturing, transportation to
warehouse, and marketing. The owners are very ambitious and
can work 40 hours each week and so have 200 hours available
each month. However, they are unable to spend more than 60
hours on any one activity (manufacturing, transportation, and
marketing) in a month. The products are in such high demand
that they are easily sold each month.
It takes 30 minutes to manufacture one Absolute Sling Chairs.
Transportation to warehouses takes 45 minutes and marketing
takes 1 hour. Awesome tables take 2 hours for both the
manufacturing and transportation phases, and marketing takes 1
hour. For Unbeatable Hammocks, manufacturing takes 0.4
hours; transportation takes 3 hours; and marketing also takes 1
hour. How many of each product should OPRE 605.7BE Inc.
produce each month to maximize profit?
a) Develop and implement a linear optimization model and
clearly explain the sensitivity report.
b) Suppose that OPRE 605.7BE Inc. shareholders voted to limit
the number of Absolute sling chairs to at most 25. How will the
solution from part (a) change?
c) Suppose that OPRE 605.7BE Inc. gets an intern for the
summer and therefore can increase the available hours for each
activity by 5 hours each month. How will the solution from part
(a) change?
Hint: for b) and c), you will need to just change the limitations
but save each in a separate tab.
Q4: Linear Regression
A national homebuilder builds single-family homes and
condominium-style townhouses. The data Question 4 Data (in
the Excel file Final Data) provides information on the selling
price, lot cost, type of home, and region of the country
11. (Midwest, and South) for closings for one month.
a) Develop a multiple regression model for sales price as a
function of lot cost and type of home without any interaction
term.
b) Determine if an interaction exists between lot cost and type
of home and find the best model. What is the predicted price for
either a single-family home or a townhouse with a lot cost of
$45,000? (Hint: remember to convert home type to numeric,
setting Townhouse to 1 and Single Family to 0 before creating
the interaction)
c) Determine if an interaction exists between lot cost and region
and find the best model. (Hint: convert the region variable to
numeric, setting Midwest to 1 and South to 0. The model in c
should also include the independent variables in b)
d) What is the strongest predictor of selling price?
Q5: Linear Regression
The data Question 5 Data (in the Excel file Final Data) provides
various data on professional football for one season.
a) Construct a scatter diagram for Points/Game and Yards/Game
in the Excel file. Does there appear to be a linear relationship?
a) Develop a regression model for predicting Points/Game as a
function of Yards/Game. Explain the statistical significance of
the model.
b) Draw conclusions about the validity of the regression
analysis assumptions from the residual plot and standard
residuals.
Q 6: Spreadsheet Modeling
OPRE 605.8B Experts (OBE) specializes in laser-assisted
corrective eye surgery. Prospective patients need to be screened
12. to ensure they would be suitable candidates for the procedure. if
they are, a $250 charge is applied as a deposit for the actual
procedure. Each week, about 180 people sign up to screened,
and about 8% of them patients fail to show up or cancel their
exam at the last minute. Patients that do not show up are
refunded the prescreening fee less a $45 processing fee. OBE
can handle 185 patients per week and is considering
overbooking its appointments to reduce the lost revenue
associated with cancellations. However, any patient that is
overbooked may spread unfavorable comments about the
company; thus, the overbooking cost is estimated to be $125.
a) Develop a spreadsheet model for calculating net revenue.
b) Find the net revenue and number overbooked if 170 through
190 appointments are taken.
FREEMAN BREWERY BAR
Team 5: Wei Li, Ting Pan, Jichang Cai, Xinyi Feng, Tianyi
Tong
AD715: Quantitative and Qualitative Decision-Making
Dr. Vladimir Zlatev
May 4, 2018
! /!1 42
Table Of Content
13. Executive Summary 3
1. Introduction 4
1.1 Problem Statement 4
1.2 Overall Goals and Objectives of the Report 4
2. Managerial Decision-Making Process for Selected Functional
Areas 5
2.1 Marketing Management and Decision Making 5
2.2 Innovation Management and Decision Making 6
2.3 Operations Management and Decision Making 6
2.4 Financial Management and Decision Making 8
2.5 Organizational and HR Management and Decision-making 9
3. Application of Decision Support Tools 11
3.1 Decision Support Tool for Marketing Management 11
3.2 Decision Support Tool for Innovation Management 12
3.3 Decision Support Tool for Operations Management 12
3.4 Decision Support Tool for Financial Management 14
3.5 Decision Support Tool for Organizational and HR
Management 15
4. Evaluation of the Result of the Business Simulation 18
14. 4.1 Comparison Based on Marketing Management 18
4.2 Comparison Based on Innovation Management 19
4.3 Comparison Based on Operations Management 19
4.4 Comparison Based on Financial Management 19
4.5 Comparison Based on Organizational and HR Management
20
5. Summary of the Results, Recommendations, and Conclusions
21
5.1 Summary of Results 21
5.2 Recommendations 21
5.3 Implementation Plan for the Selected Strategy 22
5.4 Conclusions 24
6. Appendixes 24
! /!2 42
Executive Summary
2018 has began itself up as a year of great dining experiences
especially in Chinatown. However,
the shortage of restaurants has given us an opportunity to
establish a viable project. The region is
15. currently occupied by locals and incoming tourists who provide
a ready market for the Boston
cuisine and alcoholic drinks. Prior to the establishment of this
project plan, we carried out an
extensive market analysis to determine the opportunities
available and the expected competition. In
our findings, a well-established restaurant will only face one
competitor - JM Curley Food &
Brews. The driving force behind our plan is the delivery of
excellent restaurant experiences in the
area, with the aim of building a good reputation to edge out the
competition that this project will
face once it is up and running. Some of the strategies that we
have out in place to ensure that our
services stand out include professional management of the
restaurant, deployment of a customer-
oriented approach, incorporation of innovativeness in service
delivery and the adoption of new
technology to enhance customer satisfaction.
Beginning with a maximum capacity of 20 tables, we expect to
serve at least 90 people at any given
instance. We have a vision of turning this restaurant into a
benchmark when it comes to the
provision of alcoholic beverages and foods in Boston. One of
16. our first goals is to earn the
customers’ trust in order to build brand loyalty and this will
only be achieved if we manage to put
the clients first.
Our findings indicated that we would penetrate the market fully
within three financial years,
increasing our capital investment by 15%, provided that we start
the restaurant on a good note. Part
of our marketing plan involves rolling out a publicity campaign
that we will use to sensitize locals,
especially the Boston University students regarding the special
services that we offer and the little
perks that make our restaurant the best in the region. If the
profit margins play within the postulated
range, we will possibly open a branch within the first three
years of operation so as to dominate the
entire Boston region.
! /!3 42
1. Introduction
1.1 Problem Statement
Location of the Restaurant: Chinatown of Boston, near the
green-line and orange-line subway.
17. Customers: Locals, Students, and tour visitors.
Local Competitor: JM Curley food & brews
Size of the Restaurant:
Maximum capacity= 20 tables x customers per table + bar area
= (20 x 4) + 10 = 90 maximum
capacity per visit
Number of Customers:
Maximum 90 customers/visit x 6 turnarounds/days = max. 540
customers/day o actual visitors
(based on 70% occupancy rate/year) = [(max. 540 x 0.7) x 320)]
= 378 customers/days x 320 days/
year = 120,960 annually per 2018
Number of Pints Served:
Number of customers x average pints per customer = 120,960 x
1.70 pints/customer = 205,632
units/2018 (note: results from market research: average 1.70
pints per customer)
Overall Increase of the Penetrated Market (without new
products) for the Next 3 Years:
1.2 Overall Goals and Objectives of the Report
We named our restaurant as Brewery Bar & Grill and it will be
18. located in Chinatown. As for the
size, we will begin with a maximum capacity of 20 tables, and
we expect to serve at least 80 people
! /!4 42
FY0 FY1 FY2 FY3 FYI+FY2+FY3
YEAR 2018 2019 2020 2021
TOTAL FORECASTINCREASE OF
PENETRATED
MARKET
100% 105% 110% 115%
NUMBER OF
PINTS SERVED 205,632 215,914 226,195 236,477 678,586
at any given instance. Our goal is to turn this restaurant into a
benchmark in alcoholic beverages
and foods service provision in Boston. We will invest
$1,040,000 for the brewery space, including
rent, product costs, labor costs, advertising. Our objective is
penetrating the market fully within
three financial years, increasing our capital investment by 15%.
If the profit margins play within the
postulated range, we will possibly open a branch within the first
three years of operation. We are
19. aiming to make $400,000 of net profit without taxes within the
first three years and planning to
reach break-even point within 3 months.
Vision: The business’s vision is to be the benchmark in
alcoholic substances service provision in
Chinatown.
Mission: The business’s mission is to provide effective
alcoholic substances products and affiliated
services to all clients in Chinatown.
The business’s goals and objectives will be guided by the vision
and mission. They are as listed
below as:
1. to earn trust, respect, and loyalty of our clients
2. to put the client’s best interest first and that our work should
always provide
value.
3. to hold ourselves accountable to the highest standards by
meeting our client’s
needs.
4. to recognize the value of sustainable business practices that
will work to attain
the Vision and Mission of the restaurant.
20. 2. Managerial Decision-Making Process for Selected Functional
Areas
2.1 Marketing Management and Decision Making
Marketing management is the process of developing strategies
and planning for product or services,
advertising, promotions, sales to reach desired customer
segment. According to the estimation of
! /!5 42
production costs per products, we assume that the cost of
material is $0.38, the cost of labor is
$0.20, and the cost of others is $0.26. From our research, the
price of beer is a little lower than most
other places in Chinatown, depends on the exact kind of beer.
Therefore, we chose to stock different
kind of beers in different time of the year. The seasonal styles
suit the mood and temperament in a
lovely symbiotic link.
2.2 Innovation Management and Decision Making
At the beginning of the project, we assume that our variable
cost in material is $0.28 for BR01-01,
BR01-02, BR01-07, and BR01-08, $0.25 for the rest of beer.
The assumption in labor cost for each
21. beer is $0.1, and the other variable cost is $0.15. The reasons
why we have to do the product or
technology Innovation management is that we have to increase
the quality of product and price
decrease the costs.
There are three levels in Innovation we can try to improve, the
process part, technology part and
product section. Since we are going to purchase a big amount of
material from our suppliers, we
seek to find the suppliers, which may offer a better price. After
implementing the process
innovation, the variable costs in material for the production of
all products can be reduced by 1
cent. However, we didn’t increase or decrease the cost in labors
and other costs.
Among the sections of innovation, in the cycle we chose to
innovate the product. We added a new
item BR01-10 which is called Boston Best and assuming the
beginning retail price is $5.00, since
we did a survey that the beer price in Chinatown is lower than
other place, moreover draft beer is
normally more expensive than other canned beer. The variable
cost of material, labor and others we
22. assumed that it maintains same as the previous beers. The cutoff
point is 0.8, which means that
when we sell 80% of tank we make profit.
2.3 Operations Management and Decision Making
! /!6 42
Operation management is basically dealing with any event
related to the creation of products and
services. Through studying internal and external factors, which
are related to these criteria, we can
run our business more effectively and become more productive.
After the efforts made by marketing
and innovation departments, we can look at the performance of
our new business in operation
management. There are two main goals we wish to achieve when
dealing with operation
management. The first goal is to determine an optimal fixed
cost, which would meet out capital
limitation and to produce certain amount of products, which can
meet customers’ demand
sufficiently. After we made some changes in our new business,
such as delete items with poor
performance and add our own new product, each product now
23. has certain sale volume and is able to
have a certain group of customers. Our net profit (after tax) has
reached 838,817 after we made
those changes on our products (see OPT1). In order to achieve
profit maximization and also meet
customers’ demands, we need to make adjustments on our
operation management. We expect the
target market size of each product will not change a lot in the
next three year. The market would be
relatively stable and we need to make adjustments on variable
costs to make our products more
competitive. We had a long- term relationship with our supplier,
so the raw material price would be
in a reasonable range. We slightly increased the price of labor
and other factors, such as technology,
to increase the competitiveness of our products.
Based on our demand for each product, there are two ways to
achieve our goal to increase
profitability and reduce unnecessary waste of time and money.
One is to adjust variable cost on
products that have better sales performance to reduce their
cutoff point, in this way they can be
more productive and we can further optimize their costs.
Another one is to decrease cutoff point on
24. items which have poor sales performance, in this way they can
be more profitable and we can
further work on marketing these products. For a startup
company, to invest money only on best
sellers seems to be a risky move. As a result, we decide to start
with making changes on products,
which still have room for improvement. We looked at the sales
data generated from previous cycle;
! /!7 42
we discovered that BR01-03 to BR01-06 and BR01-10 has
relatively low sales volume. As a result,
we decrease the cutoff point of BR01-03 to BR01-06, and
BR01-10 from 0.80 to 0.60(Appendix
OPT3).
2.4 Financial Management and Decision Making
For financial management decision-making process, our group
follows the process of basic
decision-making that has five steps below.
Step 1: Recognize the Need for a Decision
For this step, we have already recognized the needs for making
25. the financial management decisions
for our new bar. Because it enables us to get a better understand
of different financial aspects of our
bar and to decide materials, supplies, employees and other
important things we need to prepare for
our bar’s operation and management. As a result, we can
analyze the effects of different operating
procedures on projected profits and financial ratios on the basis
of alternative versions of the
operating plan.
Step 2: Generate Alternative
Based on brewery industry facts and operation experiences from
other bars, we decide to determine
what information is relevant to our financial aspects. We set a
range of options to choose. For
example, we set alternatives for employee aspect. For more
efficient operation, we need to have
office assistants, salesmen, executive salaries, and consultants.
We also conduct the financial
opportunity analysis to find alternatives for our products price,
fixed costs structure, profit before
taxed and free cash flows. In the end, we determine the amount
of capital that will be needed to
26. support the plan and to achieve the target sales will cost.
Step 3: Assess Alternative
To choose best alternatives, our group evaluates their
feasibility, acceptability, and desirability. We
focus more on their importance and correlation with our basic
operation. We assess different
! /!8 42
alternatives to our insurance, depreciation, growth rate, required
loan amount and other factors. And
identify sources of them and market conditions in financial
markets to determine whether we should
require external capital.
Step 4: Choose Among Alternatives
After assessing all alternatives, we decide to have seven aspects
of our financial management that
are employees; utilities, supplies and other; marketing costs;
rent; debt; taxes and financial market
indicators. And we establish our performance-based
management compensation system.
Step 5: Implement the Chosen Alternative
Next, we create a plan for implementation. We identify and
27. decide detailed budget or payment,
number, increased percentage of each point of seven aspects of
financial management. You can see
the complete data decision below. Next, we monitor operations
after implementing the plan to spot
any deviations and then take corrective actions.
2.5 Organizational and HR Management and Decision-making
For organization and HR management decision-making process,
our group follows the process of
basic decision-making that has six steps below.
Step 1: Recognize the Need of a Decision
For this step, we have already recognized the needs of making
the organization and HR
management decisions for our new bar. Because it enables us to
get a better understand of different
organizational aspects of our bar and to decide the number and
budget of the employees, salesman
and other workers’ compensation we need to prepare for our
bar’s operation and management. We
also conduct Human Resource Management analysis.
Step 2: Generate Alternative
Based on brewery industry facts and operation experiences from
28. other bars, we decide to determine
what information is relevant to our organizational aspects. We
set a range of options to choose. For
! /!9 42
example, we set alternatives for employee aspect. For more
efficient operation, we need to have
office assistants, salesmen, executive and consultants. We also
expect to generate values for HRM
analysis to find alternatives for retain of production personnel
and marketing personnel.
Step 3: Assess Alternative
To choose best alternatives, our group evaluates their
feasibility, acceptability and desirability. We
focus more on their importance and correlation with our basic
operation. We assess different
alternatives of our office assistance, salesmen, executive
salaries, and their growth rates in second
and third year.
Step 4: Choose Among Alternatives
After applying different analysis to compare all alternatives, we
decide to choose three aspects for
29. our financial management that are employees, employees’
compensation, workers’ compensation.
Step 5: Implement the Chosen Alternative
Next, we create a plan for implementation. We identify and
decide detailed budget, number,
increased percentage of each point of aspects of organization
management. You can see the
complete data decision below.
Step 6: Learn from Feedback
Finally, we adjusted the budget and salary increase of
employees. As you can see from cycle 8
(Appendix ORG 01) to cycle 9 (Appendix ORG 02), we cut
down the budget of office assistants,
salesmen and executive salaries but raised the budget of
consultants. We also reduced the salary
increase of office assistants, executive salaries and consultant
to 1.11 in FY-3 in order to cut down
the total cost of labor costs in the three consecutive financial
years.
As is shown in the employees’ compensation part (Appendix
ORG 03 & 04), we raised the base
compensation of critical salesmen from $30,000 to $30,500 in
FY-1 and also raised the salary
30. increase of critical salesmen from 2% to 8% in FY-2 and FY-3.
In total, we reduced the cost of labor
and increased the surplus.
! /!10 42
3. Application of Decision Support Tools
3.1 Decision Support Tool for Marketing Management
SWOT Analysis
We decide to use SWOT analysis to demonstrate the marketing
situation of the new brewpub. The
reason we used SWOT is that we expected to improve marketing
strategies and to reduce the break-
even point, and wanted to know our restaurant’s advantages
over competitors in Chinatown and
weaknesses that we have to improve to reduce competitive
disadvantage. Also the opportunities we
have to capture to improve our place and to be aware of external
environment that could affect the
business, which including technological, environmental and
regulatory factors.
We reduce a company’s breakeven point by reducing the
variable costs per unit, increasing selling
prices, and increasing the sales by selling the greater proportion
31. of the products having larger
contribution margins. And we will keep focusing on the existing
strengths, which is the ability to
produce good quality beer. However, we will improve the way
we stock different kind of beer in our
restaurant.
Strengths:
·Weekly special beer
·Strong marketing team
·New brewpub
·Prime location
Weaknesses:
·Lack of expertise
·complicated setup
·Not easily scalable
·High maintenance
Opportunities:
·Lower wait times
·Quick table turnover
32. ·Reduced labor costs
Threats:
·Frozen pipes in winter
·Loss of sale on snow/rainy days
·Equipment malfunction
! /!11 42
Break-Even Analysis
By calculation, we came out with the BEP as followed. As we
can see, the point is at 4.5 months
and 350000 dollars.
3.2 Decision Support Tool for Innovation Management
Sensitivity Analysis
Sensitivity analysis can determine how different values of an
independent variable impact a
particular dependent variable under a given set of assumptions.
This normally used within specific
boundaries that depend on one or more input variables, such as
the effect that changes in interest
rates have on bond prices. Since we have to predict the beer
price for next cycle, we choose to do
33. sensitivity analysis.
In sensitivity analysis table in D-analysis section, the minimum
price in Variable Costs is $0.4 for
each beer and the base price for BR-01 and BR01-02 is $0.53,
for BR01-03, BR01-04, BR01-05
and BR01-06 is $0.50, for BR01-07, BR01-08, BR01-09 and
BR01-10 is $0.41. Since we made a
survey of the beer price in Chinatown, we reset the market
research price to $5.00 for BR-01 and
BR-02, same as the price we set in cycle 2.
What-if Analysis
What-if Analysis is the process of determining the effects on
outcomes in a statistical model or
spreadsheet calculation through systematic changes in the input.
For the purpose of evaluating the
result of reducing material price, what-if analysis can suggest
whether decreasing the fixed cost can
cause a better outcome.
3.3 Decision Support Tool for Operations Management
Optimization analysis
! /!12 42
34. Our main objective is to maximize our profits by keep changing
the variable and constraints in
optimization analysis. We decide to adjust the price of our
products based on the variables, such as
raw material, labor and market size. Through applying
optimization analysis tool, we can decide
what adjustment we can make on products and market size to
maximize our profits in operation. In
other words, we want to find out the optimal selling price for
each product and also meet market
demand. If a product has high demand but the production
capacity is not enough to produce them,
we would loss customers. On the other hand, if a product has
low demand, then we need to stop
overproducing it to avoid unnecessary expand. Based on the
cutoff point change we’ve made on
some products, we decide the base of variable costs as 0.82 for
each product. We have the min value
of variable cost as 0.40 and max as 0.90. Then we apply the
solver to do the optimization analysis.
According to our result on the solver, it turned out that min
value of variable costs is precisely 0.4
and max is 0.9. It shows that we actually at a reasonable range
35. of variable costs. As a result, we
found the optimal targeted market size for each product, which
would be applied to the next cycle.
SWOT analysis
SWOT analysis can be really useful when we need to evaluate
internal and external factors, which
would possibly impact the operation of the company. These
factors should all be considered when
making any further decision on the operation of the company,
including adjusting variable costs or
market size.
Strength—After analyzing local market situation in Chinatown,
we found few competitors in this
area. Although there are many pubs or bar in Chinatown, there
are few brewpubs, which would sell
self-made beer. As a result, we can view it as an opportunity
and to put more emphasis on marketing
our self-brewing beer. We also have launched our own new
product called “Sober” which might
attract more new customers’ attention.
! /!13 42
36. Weakness—Our price of each product is relatively low
compared to other brewpub in Chinatown.
Our most expensive beer is only selling for 5 dollars. As a
result, we need to put efforts on
attracting more and regular visitors and to emphasize our cheap
but quality beer.
Opportunities—We provide our customers free samples of up to
5 different beers in out brewpub. In
other words, people can try a few mouthfuls of 5 different beers
before they make purchase. We
would also train our employees to explain characteristics of
different beer professionally. We would
also hold music events and invite local DJs to perform in our
brewpub occasionally. In addition, we
also have a perfect location for opening a brewpub. We have
many potential customers such as BU
students or tourists visiting Boston University.
Threats—The rent in this area increases every year. As a result,
we need to make profits in a short
period of time in order to afford the rent.
3.4 Decision Support Tool for Financial Management
Break-Even Analysis
To use this analysis method, our group first identifies and
37. classifies the variable costs that change
when the production output changes and fixed costs that not
directly related to the volume of
production. We enter the data of revenue, expenses, total fixed
costs and contribution of the total
brand and each product in the first financial year. And calculate
the contribution margin of them.
And then, we compare total fixed costs, total revenue and the
total cost to find the point at which
neither profit nor loss---“break-even point”. We calculate the
break- even for months is 3.72, which
equals total fixed costs/ contribution* 12 months and the break-
even for sales is US$ 308,918,
which equals total fixed costs/ contribution margin. And we
also calculate the X-axis range, fixed
cost range, total revenue range and total cost range.
We can see from the chart that the break-even point is the point
of intersection of the total revenue
line and total cost line. So when total revenue line is above the
total cost line, our bar will have
! /!14 42
profits, and when total revenue line is below the total cost line,
38. our bar will make a loss. And at the
point of intersection, the break-even point, costs are exactly
equal to income, and our bar will make
neither profit nor loss.
Risk Analysis
To measure the probability of our bar’s success or failure and
the possible future economic states,
we use risk analysis to analyze our bar. After entering the
relevant data for calculating, we get the
chart of three financial year’s profit after taxed chart. In each
chart, the red column is representing
the cycle 8. As a result, we gain the outcome from these charts
below to identify the financial
management risk. For FY-1, cycle 8’s average (profit) is US
$242,015, failure rate (profit) is 2.0%,
and standard deviation (profit) is US$ 55,530. For FY-2, cycle
8’s average (profit) is US $118,760,
failure rate (profit) is 5.0%, and standard deviation (profit) is
US$ 63,307. For FY-3, cycle 8’s
average (profit) is US $105,893, failure rate (profit) is 8.0%,
and standard deviation (profit) is US$
70,198. In addition, we also analyze the 36 months profit after
taxed (in thousand), and get the
39. outcome for cycle 8 that the average (profit) is US$366,667,
failure rate (profit) is 2.0%, standard
deviation (profit) is US$ 99,834, average IRR is 68.64%, failure
rate (return on investment) is 3.0%
and standard deviation (IRR) is 25.97%.
3.5 Decision Support Tool for Organizational and HR
Management
Optimization Analysis
We conduct optimization analysis to find optimum value for a
target variable under given
circumstances. It is widely used for making decisions related to
optimum utilization of resources in
an organization. During optimization analysis, the values for
one or more variables are changed
repeatedly. Therefore, we need to keep in mind the specific
constraints, until the best values for
target variable are found. They can, for example, determine the
highest level of production that can
! /!15 42
be achieved by varying job assignments to workers. Some
workers are skilled and their job
assignment cannot be changed. Solver tool in Microsoft excel
40. are used for making optimization
analysis (Appendix ORG 05). We assigned employees to
available offices to maximize satisfaction
of employee preference. We scheduled workers for weekly
“shifts” (five works days plus two
consecutive days off) to minimize payroll costs while meeting
varying demand of each day of the
week, optionally taking into account employee seniority and
preferences. We decide how many
employees to retrain, hire and fire to meet changing workforce
composition requirements while
minimizing costs or employee turnover.
SWOT Analysis
Strengths
Strengths are internal factors that enable HR strategy and
functionality. HR strategy refers to long-
term goals, such as building a top-tier workforce or becoming
an employer of choice. We conduct
open enrollment sessions for employees to select new health
insurance coverage. Our internal
strengths are executive leadership who support and promote HR
strategic development and HR staff
knowledge and expertise because they are the employees
41. ultimately responsible for carrying out
tactical duties. As is shown in the chart below (ORG 06 SWOT
Analysis- Strength), we have
obvious strength in operation and research & engineering over
other three competitors.
Organization strength is not prominent, therefore, we decided to
strengthen the unity of values and
clarity of purpose in our organization.
Weaknesses
Weaknesses also are internal factors that pose challenges to the
success of HR endeavors. Internally,
budget constraints and cuts are conditions that HR often has to
deal with, primarily because HR isn't
a revenue-producing department. As we have cut down a huge
budget of employees, HR has to rely
on sound justification to fund investments in HR activities.
However, money isn't the only
! /!16 42
weakness. Low employee morale and high turnover are serious
internal factors that can disrupt HR.
In this case, disruption refers to immediate and reactive
measures HR must take to reverse an
42. overwhelming sense of dissatisfaction throughout the
workforce. As is shown in the chart below
(Appendix ORG 07 SWOT Analysis-Weakness), our biggest
weakness is political reason such as
funding, grants and initiative, home market lobbying and
pressure groups, internal political issues
and so on. Fortunately, our personnel turnover is not as high as
our competitors, which means we
have a strong employee loyalty.
Opportunities
One of the most significant external factors for HR is the
opportunity for workforce growth, due to
increased demand for the company's products and services.
More business translates into better
raises or higher wages for current employees, along with growth
for the surrounding community
through the hiring of more workers. External factors also may
present themselves as the company's
ability to land a highly successful rainmaker whose business
development activities improve the
company's reputation or industry ranking. As is shown in the
chart below (Appendix ORG 08
SWOT Analysis- Opportunity), our opportunities lie in
economic and technological factors. We
43. have higher production level over our competitors and our
internal finance situation is relatively
good. Besides, we have competing technology development,
manufacturing maturity and capacity,
and huge innovation potential.
Threats
Threats are external factors that negatively impact the company
and, ultimately, the HR department.
When a competitor gains an edge in the market share, it affects
profitability and may result in
layoffs, business slowdown or closure. Other types of external
threats include businesses — not
necessarily in the same industry — that offer better working
conditions, wages or benefits to their
employees and, therefore, recruit the best-qualified workers. HR
departments can't always insulate
themselves from all external factors because some are
imminent. However, HR can diminish the
! /!17 42
impact of external threats through conducting routine
assessments of compensation structure,
surveying employee opinion on working conditions and
44. strengthening the employer-employee
relationship through showing HR as a strategic business partner
that values human capital. As is
shown in the chart below (Appendix ORG 09 SWOT Analysis-
Threat), economic factors are also
the biggest threat, such as market routes and distribution, job
growth and so on. Legal and social
factors will also threaten our business. For example, lifestyle
and people’s attitude toward food may
change and they pursue a healthy lifestyle, then they will not
choose to go to our pub.
4. Evaluation of the Result of the Business Simulation
4.1 Comparison Based on Marketing Management
We notice that in different cycles, the figures in targeted market
size are different. As we can see, in
FY-1, from cycle 1 to cycle 7, BR01-01 decreased from 23.00%
to 20.00% and then climb back to
21.45%. BR01-02 had a same trade as BR01-01. Meanwhile, in
cycle 1, 07 and 08 occupied 45%
and 55% in wholesale respectively, but in cycle 2, 07 has
increased to 47% and 08 has been down to
53% and remain steady in cycle 5. In cycle 7, the data of 07
keep decreasing to 46.75% and 08 has
45. raised to 53.25%. In that case, we can calculate the demand
quantity per month in cycle 1(Appendix
MKTG 11), cycle 2(Appendix MKTG 06), cycle 5(Appendix
MKTG 12), and cycle 7(Appendix
MKTG 13).
As can be seen from the chart, in FY-1, BR01-01 and 02 are the
most popular products because the
demand and supply are the most. Although BR01-03 and 04 not
the most popular one, but there was
a large gap between demand and supply, and demand is more
than supply.
We ran the trend analysis in cycle 2 and as a result, except the
fix cost, others like revenue, expense,
contribution and profit BT , in every year, would showing a
trend that increasing in the first three
quarters and reaching a peak at the third quarter, then decrease
at the forth.
! /!18 42
4.2 Comparison Based on Innovation Management
Applying these two tools, the sensitivity analysis indicates that
when our price is set at $6 for
BR01-01 and BR01-02, $5 for BR01-03 to BR01-07, we have
46. the highest profit, however, in the
result of many inputs one output the recommendation price for
the beer is $4 and $3.5 respectively.
We decide to adopt the many inputs one-output results, since we
consider that the price is more
logically in the draft beer market. What-if analysis demonstrates
the result of the assumptions in
adjusting fixed cost. The outcome indicates that after adjusting
the variable cost in material in cycle
3, decrease the fixed cost may be a quite efficient operation to
do.
4.3 Comparison Based on Operations Management
After we ran the business simulation on operation management,
we increased the total net profit
after taxes from $780,137 to $838,817(OPT1).
After we made adjustments on cut-off point toward some
products and variable costs, we found out
that the sales projection of future three years increases from
1,341,372 to 1,365,352. The result
proved that we had successfully become more efficiently on
production.
4.4 Comparison Based on Financial Management
To identify the performance of the data outcome, we analyze
47. some key performance indicators that
are actual size of the local market, number of customers
existing business, average consumption per
existing customer, size of the penetrated market, projected
increase of the penetrated market,
projected structure of the annual sales, projected sales,
projected consumption, wholesale
distribution and capacity of the new technology. We calculate
the units, numbers or percentage of
them in FY-0, FY- 1, FY-2, FY-3 and the summary of FY1, 2
and 3.
And then, we compare the projected consumption current cycle
to project start in retail and
wholesale aspects and in three financial years. We can see that
the project- start and current cycle
! /!19 42
are basically equal and increasing year by year in retail aspect.
And in wholesales aspect, they have
big differences and also increasing year by year. And there is
also a pie chart below to show the
percentage of retail aspect in wholesale aspect. We can see that
the percentage is basically equal
from year one to year three in these two aspects.
48. Our revenue and expenses will keep the same leverage in three
financial years, and the percentage
of profit before taw will decrease year by year. There is a line
chart of our revenue, expenses,
contribution, fixed costs and profit BT in FY-1, FY-2, FY-3 and
summary of FY-1, 2 and 3. We can
see the trend analysis outcome from this chart that our revenue,
expenses, contribution, and profit
BT will have a large amount of increase in financial year 3 and
keep basically same in FY-1 and
FY-2. And the fixed costs will increase year by year.
4.5 Comparison Based on Organizational and HR Management
To identify the performance of the data outcome, we analyzed
some key success indicators that are
the utilization of introducing an individually controlled brand,
retain of critical technology
personnel, retain of critical marketing personnel. We calculated
the numbers or percentage of them
in FY-1, FY-2, FY-3. The data outcomes are shown in Appendix
ORG 10 Key Success Indicators.
Besides, we also analyzed some key performance indicators that
are actual size of the local market,
number of customers existing business, average consumption
49. per existing customer, size of the
penetrated market, projected increase of the penetrated market,
projected structure of the annual
sales, projected sales, projected consumption, wholesale
distribution and capacity of the new
technology. We calculate the units, numbers or percentage of
them in FY-0, FY-1, FY-2, FY-3 and
the summary of FY1, 2 and 3. Data outcomes are shown in
Appendix ORG 11 Key Performance
Indicators. And then, we compare the projected consumption
current cycle with project start in retail
and wholesale aspects in three financial years (Appendix ORG
12 Projected Consumption). We can
see that the retail in cycle 9 decreased 6.2% in FY-1, 7.4% in
FY-2, 9.4% in FY-3 compared with
! /!20 42
those of project-start but it increased year by year. The
wholesale in cycle 9 also dropped 2.1% in
FY-1, 2.5% in FY-2, 2.3% in FY-3 but it grows year by year.
And there is also a pie chart below to
show the percentage of retail and wholesale in project-start and
cycle 9. We can see that wholesale
50. is projected to take the major percentage of the distribution,
accounting for about 70%.
After that, our group does the trend analysis. You can see the
table and pie chart outcome below.
(Appendix ORG 13 Trend Analysis 1) Compensation will
account for the majority of the total fixed
costs and increases year by year. Profit before tax are
approximately 2.5 times of fixed cost and it
will increase year by year.
Our revenue and expenses will keep the same leverage in the
consecutive three financial years, and
the percentage of profit before tax will decrease year by year.
There is a line graph of our revenue,
expenses, contribution, fixed costs and profit before tax in FY-
1, FY-2, FY-3 and summary of FY-1,
2 and 3 (Appendix ORG 14 Trend Analysis 2). We can see the
trend analysis outcome from this
chart that our revenue, expenses, contribution, and profit BT
will grow sharply from Q1 to Q3 and
decrease in Q4 in all the three consecutive financial years. And
the fixed costs will keep the same in
all the three consecutive financial years.
5. Summary of the Results, Recommendations, and Conclusions
51. 5.1 Summary of Results
The last business simulation cycle (cycle 11) shows our best
result. Our profits steadily grow each
year. We generate total net profits 363,463, 401,642 and
435,864 respectively for next three year.
5.2 Recommendations
With each passing year, more businesses are setting up in the
country, making the alcoholic
substances market much more intensely competitive. Almost all
alcoholic substances industry
players practice traditional brewing services as well as product
supply, making the supply of such
! /!21 42
common services significantly exceed their demand. In order to
position themselves to take on the
market, most high profile alcoholic substance business
especially in the area have begun to major in
alien areas of the alcoholic substances industry but still find
themselves in common areas of
industry. Therefore, this new alcoholic substances business
might be new entrants in the industry
but we have committed ourselves to focus on a less ventured
product, being the rendering of online
52. supported products under areas of alcoholic substances industry
which have a lot of potential and
little competition.
Most of the existing businesses that have ventured into these
areas of services are very few in the
country but large and having financial muscle to influence big
businesses and well- known figures
in the various alcoholic substances industry sections that the
start- up business plans to major in.
This therefore gives your start- up business an opportunity to
offer your services to the small scale
and mid-sized clients as well as individuals in the various
sectors who may not afford the services
of the well-established businesses.
5.3 Implementation Plan for the Selected Strategy
At the beginning phase of our project, we decided to invest
$1,000,000 for the fixed cost, including
rent, employee salaries, utilities, and marketing cost etc., and
variable costs. Then we put a total of
$15,000 to purchase a micro-brewery system. To sum up , we
need 1,040,000 upfront capital to start
a new brewpub in Chinatown. The implementation plan for the
selected strategy is listed as below:
53. ! /!22 42
! /!23 42
Implementation Plan
# Tasks & Sub-Tasks Duration(days) Start date Finish date
Predecessor
Upfront
Funds($)
1 Investment decision 9 2018/3/11 2018/3/20 None
2
To accept the offer
and invest $1,000,000 9 2018/3/11 2018/3/20 None
US$1,000,000
3
Prepare a business
plan for the new
business unit and
secure finances
12 2018/3/20 2018/4/1 Investment decision
4
Purchase the
microbrewery system
54. and arrange
transportation
14 2018/4/1 2018/4/15
Prepare a
business plan for
the new business
unit and secure
finances
US$15,000
5
Prepare the production
and distribution site for
the new business unit 19 2018/4/1 2018/4/20
Prepare a
business plan for
the new business
unit and secure
finances
US$3,000
6
Hire the relevant
personnel to operate
55. the brewery
29 2018/4/1 2018/4/30
Prepare a
business plan for
the new business
unit and secure
finances
US$5,000
7
Installation of the
system and training of
the personnel 10 2018/4/30 2018/5/10
Hire the relevant
personnel to
operate the
brewery
US$2,000
8
Marketing campaign
56. to increase the
awareness of the new
offering
59 2018/4/1 2018/5/30
Prepare a
business plan for
the new business
unit and secure
finances
US$15,000
9
Enter into multi-year
contracts with pre-
selected buyers 15 2018/4/30 2018/5/15
Installation of the
system and
training of the
personnel
US$1,040,000
10
Monitor business
57. metrics closely and
take any necessary
action quickly to avoid
failure
Forever 2018/5/15 Forever
Enter into multi-
year contracts
with pre- selected
buyers
5.4 Conclusions
By following the implementation plan, we are confident about
the opening of our new brewpub. We
would focusing on advertising our home made beer and
distinguish ourselves from other
competitors in the area. Since there are only few competitors,
we are planning to open one more
brewpub in this area to attract more local customers following
similar decision-making strategy.
6. Appendixes
• Marketing Management
Appendix MKTG 1: Product Name & Description ( Cycle 1 &
59. Appendix INNO 3: What-if Analysis
! /!28 42
• Operation Management
Appendix OPER 1: Forecast for the Next Three Years
Before
! /!29 42
After
Appendix OPER 2: Optimization Analysis
! /!30 42
Appendix OPER 3: Comparison of Net Profit (After Taxes)
Between Cycle 5 and Cycle 6)
• Financial Management
Appendix FIN 1: Employees & Utilities, Suppliers and Others &
Marketing Costs
Appendix FIN 2: Rent, Debt, Taxes, and Financial Market
Indicators
60. ! /!31 42
Appendix FIN 3:
Appendix FIN 4: Break-Even Analysis ( Cycle 8) -1
Appendix FIN 5: Break-Even Analysis ( Cycle 8) -2
Appendix FIN 6: Risk Analysis -1
! /!32 42
Appendix FIN 7: Risk Analysis -2
Appendix FIN 8: Risk Analysis -3
! /!33 42
Appendix FIN 9: Risk Analysis -4
Appendix FIN 10: Performance -1
Appendix FIN 11: Performance -2
! /!34 42
63. Decision-Making Process for Selected Functional Areas2.1
Marketing Management and Decision Making2.2 Innovation
Management and Decision Making2.3 Operations Management
and Decision Making2.4 Financial Management and Decision
Making2.5 Organizational and HR Management and Decision-
makingApplication of Decision Support Tools3.1 Decision
Support Tool for Marketing Management3.2 Decision Support
Tool for Innovation Management3.3 Decision Support Tool for
Operations Management3.4 Decision Support Tool for Financial
Management3.5 Decision Support Tool for Organizational and
HR ManagementEvaluation of the Result of the Business
Simulation4.1 Comparison Based on Marketing Management4.2
Comparison Based on Innovation Management4.3 Comparison
Based on Operations Management4.4 Comparison Based on
Financial Management4.5 Comparison Based on Organizational
and HR ManagementSummary of the Results,
Recommendations, and Conclusions5.1 Summary of Results5.2
Recommendations5.3 Implementation Plan for the Selected
Strategy5.4 Conclusions5.4 ConclusionsAppendixes
