RDI/EDEXCEL

HNC/HND Assignment

Programme: Higher National in Business (Management) / Business (Finance) / Business (Marketing)

Module Title: Business Decision Making

Module Level: Level 5

Tutor: Simon Wong

E-mail: swong@rdihongkong.com

Date for Completion: 20th October, 2011

Business Decision Making Assignment

Summary of learning outcomes

To achieve this unit a learner must:1. Use a variety of sources for the collection of data, both primary and

secondary2. Apply a range of techniques to analyse data effectively for business

purposes3. Produce information in appropriate formats for decision making in an

organizational context4. Use software-generated information to make decisions at operational,

tactical and strategic levels in an organisation.

Case Background

Autocare is a car detailer providing three lines of vehicle services, specifically, car washing, paint protection, and car waxing. The company has committed to a strategy of aggressive sales growth.

The Business Director of Autocare, however, still feels dissatisfied with the sales growth of the company in the last five years. He identifies five key weaknesses and threats encountered by Autocare, including

1) Absence of customer retention strategy2) Poor quality and service level3) Insufficient number of services centres4) Stagnant economy5) Disruption in the replenishment of supplies

Task 1

Autocare is going to bid for a servicing contract for government vehicles. The contract is important for the company to pursue rapid business growth for the years ahead. You are the Business Director of Autocare. You will meet with the government officials on 1 March 2011 for a briefing on the financial and operating strength of the company. Required

(a) Prepare a business presentation using suitable software and techniques to disseminate the financial and operating information of Autocare at Appendix I effectively and persuasively. In order to achieve this task, you must print the presentation in slide layout format with additional presentation notes for assignment submission. (LO 3.3)

(b) You have to use a spreadsheet to prepare a range of graphs, including line chart, pie chart, bar chart, and histograms, in order to present the various data at Appendix I appropriately, and draw valid conclusions based on the

Business Decision Making Assignment 2

information derived. After preparing the graphs using the spreadsheet, you may embed them to your presentation. (LO 3.1)

Task 2

The Business Director has made a preliminary research, as specified at sub-tasks (b) to (d) below, on the weaknesses and threats of the company. He believes that a large-scale business research project should be initiated in order to understand the real strategic position of the company.

Required

(a) Prepare a formal Project Initiation Report to persuade the Budget Committee of Autocare in the capacity of the Business Director. You should use the sub-tasks (b) to (d) to justify the need for a large-scale business research project. The report should be structured into meaningful sections. On the other hand, sub-tasks (e) to (g) are to let the Budget Committee understand the scope of the research. Further, you may insert other additional details to the report as needed. You are required to organise them logically into appropriate sections of your report. It is not mandatory to follow the order of the sub-tasks below. (LO 3.4)

(b) The Business Director decides to use the returning customers as an indicator of the company’s current position on the customer retention rate. The returning customers data for all customers at the company’s database are shown below:

Number of services orders placed in 2010

Number of customers

1 2,631 2 4,142 3 2,117 4 1,062 5 4,310 6 674 7 1,354 8 878 9 910

10 520

(i) The above table tells, for example, 2,631 customers placed only one order in 2010. You should summarising the data in the above table into representative values (i.e. mean, median, mode, and frequency distributions) and use the results to draw valid and useful conclusions in light of the purpose of the report. (LO 2.1)

Business Decision Making Assignment 3

(ii) Analyse the data in the above table using measures of dispersion (i.e. maximum, minimum, standard deviation), and use to describe the returning customers profile of Autocare. (LO 2.2)

(c) The Business Director, on the other hand, decides to use the number of customer complaints as an indicator of the company’s poor quality and service level. The number of customer complaints in January 2011 and their grounds are shown below:

Value of related services Number of complaints due to

$Delay for

shortage of supplies

Poor workmanshi

p

Non-fulfillment of

customer needs

Total

0 - 999 7 2 21 301,000 - 1,999 45 20 25 902,000 - 2,999 77 34 39 1503,000 - 3,999 12 201 127 3404,000 - 4,999 105 42 143 2905,000 - 5,999 187 10 73 2706,000 - 6,999 62 37 91 1907,000 - 7,999 10 8 22 40

(i) Analyse the data in the above table using measures of dispersion (i.e. maximum, minimum, standard deviation), and use to describe the customer complaints profile of Autocare. (LO 2.2)

(ii) Calculate quartiles and percentiles, and use Pareto analysis to draw a useful conclusion on the most important grounds of complaints that Autocare should focus to address. (LO 2.3)

(d) The Business Director plans to forecast the revenues in 2011 (ignoring the government bid). Although the Business Director thinks that the revenues might follow a time series pattern, he does not rule out any possibility that their trend may be more subject to GDP of the country, the number of service centres, or the number of complaints.

As the general price level of the country was not quite stable in the last five years, the Business Director believes there is a need to adjust the GDP in the revenues projection. On the other hand, the general price level should not affect the company’s revenue because the company did not change any service charges in the last five years.

You may refer to Appendix I for the revenues in the last five years. Relevant data for the projection are shown in the below table.

Business Decision Making Assignment 4

Year GDP ($'million)

General Price Index

Number of complaints

Number of service centres

2006 23,254,640 125 25,102 303 2007 27,327,952 127 20,378 302 2008 26,000,187 124 19,210 310 2009 28,110,876 130 18,311 352 2010 29,338,745 133 17,670 352 2011

estimate31,500,000 134 16,000 360

(i) Use trend lines in spreadsheet graphs to assist in forecasting for the revenues of 2011. (LO 3.2)

(ii) Project the revenues of 2011 by using regression analysis and draw conclusion in light of the correlation coefficients between revenues and GDP, number of complains, and number of service centres respectively. (LO 2.3)

(e) Include an implementation plan for the collection of primary and secondary data for researching into the five weaknesses and threats mentioned at the case background in the report. You have to identify the specific primary and secondary data for EACH of the five weaknesses and threats and justify with reasons. (LO 1.1)

(f) Describe and justify the survey methodology for the research and frame used for researching into the five weaknesses and threats mentioned at the case background. (LO 1.2)

(g) The Business Director expects to attach a questionnaire at the appendix of the report to let the Budget Committee understand the scope of the research more fully. Develop the questionnaire and justify its design. (LO 1.3)

Task 3

The Business Director would like to address the disruption on the replenishment of supplies shortly. Assuming that you are the Stock Control Manager, write a memo to answer the queries of the Business Director as below:

Required

(a) Autocare is now using the Economic Order Quantity (EOQ) method to replenish the supplies. In 2010, Autocare purchases 345,000 units of supplies from a single supplier. The supplies cost $20/unit. The cost of

Business Decision Making Assignment 5

ordering a new batch from the supplier is $96 and the cost of holding one unit in warehouse is $12 per year plus an interest cost equal to 5% of the purchase price of the supplies. You have to show the prevailing replenishment flow to the Business Director.

Assuming that the usage of the supplies is evenly distributed in 2010, prepare a spreadsheet to enable material requirements planning and calculate the economic order quantity. (LO 4.3)

(b) Discuss the possible reasons for the replenishment disruption in light of the imitations of EOQ method. Review and evaluate other possible inventory control systems (i.e. continuous and periodic review, Pareto analysis, material requirements planning) for Autocare. Explain their compatibility and advantages over EOQ as well as the potential problem that might create. (LO 4.2)

Task 4

Another problem that the Business Director expects to address is the management information systems of Autocare. In a private meeting with the government officials, the Business Director learns that all government vendors have to interact with the Government Vendor Management Systems through the Extranet technology. However, Autocare does not have any e-Business initiatives at the moment.

The Business Director has provided some information to an independent MIS consultant in order to seek for his advice on the following issues. Assuming that you are the independent MIS consultant, write a replying letter to the Business Director.

Required

(a) You know that Autocare is now only using a mid-range accounting system and spreadsheet to support its entire management information needs.

Review the limitation of using them to support Autocare at the respective operational, tactical and strategic levels and suggest appropriate information processing tools for EACH level. (LO 4.1)

(b) The Business Director expects a new enterprise-scale management information system will enable Autocare to develop new business in the next five years with an annual cash inflow of $1 million. Savings that can be achieved in the next five years will be $50,000 per year. The new business requires an additional working capital of $600,000 immediately. The cost of capital of Autocare is 15%.

You estimate that the new enterprise-scale management information system costs $3.5 million.

Business Decision Making Assignment 6

(i) Use financial tools – discounted cash flow and internal rates of return (IRR function) to evaluate the financial viability of the proposed investments.

(ii) You know that it might be cheaper to lease the system. In case the investment is not financially viable, estimate the maximum annual lease payment to make the project viable. Calculate the IRR of the project under lease. (LO 4.5)

(c) The Business Director requests you to prepare a project plan (i.e. critical path analysis and Gantt chart) for the implementation of the new system and determine its critical path. (LO 4.4)

The activities of the implementation are listed below:

Activity ID

Activity Duration

(weeks)

Preceding

ActivitiesA Collect quotations 12 NoneB Finalise the specification of new system 6 NoneC Form project team for the new system 10 BD Upgrade networking 7 AE Purchase contract signed 1 BF Install furniture 18 DG Test hardware and software 6 C, EH Line up all resources 15 F, GI Perform user acceptance test 7 GJ Install hardware and software 6 FK Perform training 12 H. J

Business Decision Making Assignment 7

Student Guidelines

1. You should write this assignment by answering each task in turn just using the task number as a heading.

2. You should use diagrams and tables of figures where appropriate ensuring to reference their source.

3. You should include a bibliography using the Harvard referencing system.

4. All tasks must be completed in the word limit of 2500-3000 words excluding table of figures, diagrams and appendices.

Business Decision Making Assignment 8

Appendix I

Autocare summarised five years financial data$'000 2010 2009 2008 2007 2006Statement of Income Data

Revenues220,90

4 210,11

8 198,20

0 155,30

0 121,27

7 Total Costs and Other Deductions

188,737

178,142

173,003

134,749

108,601

Income Before Income Taxes 32,167 31,976 25,197 20,551 12,676 Income Tax Expense 13,479 14,838 11,098 7,517 5,294 Income From Operations 18,688 17,138 14,099 13,034 7,382

Balance Sheet Data (at December 31)Current assets 39,377 36,304 34,336 28,503 19,426

Noncurrent assets109,40

9 96,324 91,497 64,705 62,044

Total Assets148,78

6 132,62

8 125,83

3 93,208 81,470 Short-term debt 1,162 2,159 739 816 1,703 Other current liabilities 32,636 26,250 24,272 17,979 14,408 Long-term debt 6,070 7,679 12,131 10,456 10,894 Other noncurrent liabilities 31,830 27,605 26,015 18,727 18,170 Total Liabilities 71,698 63,693 63,157 47,978 45,175 Stockholders' Equity 77,088 68,935 62,676 45,230 36,295

148,786

132,628

125,833 93,208 81,470

Business Decision Making Assignment 9

Outcomes and assessment criteria

Outcomes Assessment Criteria for Pass

1. Use a variety of sources for the collection of data, both primary and secondary

1.1 Prepare and implement a plan for the collection of primary and secondary data for a given business problem

1.2 Describe and justify the survey methodology and frame used

1.3 Develop and use a questionnaire and justify its design for a particular purpose

2. Apply a range of techniques to analyse data effectively for business purposes.

2.1 Create information for decision making by summarising data using representative values, and using the results to draw valid and useful conclusions in a business context

2.2 Analyse data using measures of dispersion, and use to inform a given business scenario

2.3 Calculate quartiles, percentiles, correlation coefficient, and use to draw a useful conclusion in a business context

3. Produce information in appropriate formats for decision making in an organizational context

3.1 Using data from a given business scenario, prepare a range of graphs using spreadsheet, line, pie bar charts and histograms, and draw valid conclusions based on the information derived

3.2 Use trend lines in spreadsheet graphs to assist in forecasting for specified business information and thus inform decision making

3.3 Prepare a business presentation using suitable software and techniques to disseminate information effectively and persuasively

3.4 Prepare a formal business report

4. Use software generated information to make decisions at, operational, tactical and strategic levels in an organization

4.1 Review management information systems and suggest appropriate information processing tools for operational, tactical and strategic levels of the organization

4.2 Review and evaluate inventory control systems in an organization

4.3 Prepare a spreadsheet to enable material requirements planning and calculate economic order quantities

4.4 Prepare a project plan for an activity and determine its critical path

Business Decision Making Assignment 10

4.5 Use financial tools – discounted cash flow and internal rates of return (IRR function) to evaluate the financial viability of proposed investments.

Performance Criteria

Each unit will be graded as a Pass, Merit or Distinction. A pass is awarded for the achievement of all outcomes against the specified assessment criteria. Merit and Distinction grades are awarded for higher-level achievement.

Pass

The candidate has demonstrated a basic understanding of relevant theory but with limited, generalized application.

Mainly descriptive responses, little analysis. All outcomes are achieved by responses to set tasks Assignment has met deadline for submission.

Merit

As for a pass but with more analytical detailed responses. Assignment responses demonstrate a sound understanding and application

of theoretical techniques of financial management and their relevance to business organizations.

There is evidence of a clear understanding of both macro- and micro-environments.

Student uses a range of methods and techniques to collect analyse and interpret data and information.

Business Decision Making Assignment 11