Business Environment Analysis Report - Operations Management

This report presents an analysis of a business environment, addressing various problems related to operations management. The report begins with a regression analysis, exploring the relationship between blood pressure, age, and weight. It then delves into the establishment of an e-commerce ...Read More

Running Head: ANALYSIS OF THE BUSINESS ENVIRONMENT
Analysis of the business environment
Name of the Student
Name of the University
Author’s Note

1ANALYSIS OF THE BUSINESS ENVIRONMENT
Table of Contents
Problem 1:........................................................................................................................................2
Problem 1.a..................................................................................................................................2
Problem 1.b..................................................................................................................................2
Problem 1.c..................................................................................................................................3
Problem 2:........................................................................................................................................3
- Introduce your business (i.e., Product/service, target market, industry in which your business
operates) either you are setting up a new business or using an existing company/business.......3
- You would need to conduct research on two potential locations (e.g., two cities in New-
Zealand) and to find relevant information in regards to the following FIVE criteria:................4
Give weight to each of the criteria and justify differential of weighting based on your research
findings and based on the need of your business.......................................................................10
Perform a factor-rating method to evaluate suitability of the locations and select the most
suitable location out of the two locations..................................................................................10
Problem 3:......................................................................................................................................11
As a production manager of RMC, what do you recommend? Why? Support your
recommendation using arguments, such as short-term costs VS long term benefits, scale
effects. You do not necessarily need to do any calculation for this problem but write your
recommendation using the arguments as suggested or based on similar arguments.................11
Compare and contrast the benefits and costs of using apple-picking robot and present your
report..........................................................................................................................................11
Bibliography..................................................................................................................................13

2ANALYSIS OF THE BUSINESS ENVIRONMENT
Problem 1:
The systolic blood pressure varies depending on the age and the weight of a person.
Problem 1.a
The slope coefficient of the variables, age and weight are 0.293 and 0.665 respectively.
The intercept term of the model is 2.468. The estimated model obtained from the regression is
presented below:
^systolic blood pressure=2.468+( 0.293∗age∈ years)+ ( 0.665∗weight ∈ pounds )
Problem 1.b
The estimated slope coefficient of age is 0.293 with p-value 0.229 (>0.05). This implies
that unit increase in age will raise blood pressure by 0.293 unit. However, the p-value is quite
high, and thus slope coefficient is not statistically significant.

3ANALYSIS OF THE BUSINESS ENVIRONMENT
The estimated slope coefficient of weight is 0.665 with p-value 0.000 (<0.05). This
implies that unit increase in weight will significantly raise the blood pressure by 0.665 unit at 5%
significance level.
So, it is necessary to focus on weight as the corresponding coefficient have a significant
effect on blood pressure.
Problem 1.c
The adjusted R2 is 0.959 which indicates that the model can predict up to 95.9%
accuracy. The f-stat is 116.630 and significant at 99% significance level which shows the better
goodness of fit.
Problem 2:
- Introduce your business (i.e., Product/service, target market, the industry in which your
business operates) either you are setting up a new business or using an existing
company/business.
The new business that will be created will be the e-commerce business. Since the
consumer market of New-Zealand, it more prone to the e-commerce platform. The two new
specific areas in which the business will be carried out is Auckland and Northland. However,
speaking in terms of the market potential Northland is more advantageous in comparison to that
of Auckland.
The target market will comprise of each of the consumer market segment, as the e-
commerce business aims to provide commodities that will aim at the satisfaction of the
individual consumer segments. On the other hand, the purchasing power ability that stays in the

4ANALYSIS OF THE BUSINESS ENVIRONMENT
hand of the economy is stronger. Both the chosen destination has a presence of the adequate
amount of consumers that are professional and have a strong desire of the consumer products.
- You would need to conduct research on two potential locations (e.g., two cities in New-
Zealand) and to find relevant information in regards to the following FIVE criteria:
I) Cost and availability of labour:
In terms of Auckland, below image demonstrates the annual-wage inflation rate, it has been
show with means of labour cost index. It has been arrived near to about 2.0 percent within the
first quarter of the year 2019. It was about 1.9 percent in the previous period of time, compared
to market expectations of 2.1 percent, as private sector wage growth remained at 2.0 percent, and
public sector wages rose 1.9 percent, faster than a 1.7 percent increase in the previous three-
month period.
Figure: New Zealand Labour Costs
Source: (Tradingeconomics.com, 2019)

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In terms of the Northland, the labour cost has shown a hike to the extent of about 103.60 Index
Points within the fourth quarter of the year 2018. The hike has been resulting in comparison to
the third quarter of 2018, which was about 102.60 Index Points in the. Labour Costs in Northland
averaged 76 Index Points from 1985 until 2018, reaching an all-time high of 103.60 Index Points
in the fourth quarter of 2018.
Figure: Northland Labour Costs
Source: (Tradingeconomics.com, 2019)
II) Customer density and demographics:
Speaking in terms of Auckland, the estimated consumer population as of the year 2016 outstands
to about 1.415 million. It comprises of the Asian, Maori, and Pacific Islander as well. The
ethnicity composition of the country is about European amounting to about 59.3%, Pacific
Islander amounting to about 14.6%, Asian amounting to about 23.1%, Maori amounting to about
10.7%, Middle Eastern/Latin American/African about 1.9%, and other about 1.2%.

6ANALYSIS OF THE BUSINESS ENVIRONMENT
Figure: Customer density and demographics of Auckland
Source: (Tradingeconomics.com, 2019)
Speaking in terms of the Northland, the total population at the present phase of time outstands to
about 151,692. However, there has been a hike up in the population such that growth took the
place of about 2.2 percent. Within the region of the New-Zealand, the country is being ranked
among the 8th position.
Figure: Customer density and demographics of Auckland
Source: (http://archive.stats.govt.nz, 2019)

7ANALYSIS OF THE BUSINESS ENVIRONMENT
III) The proximity of supplier and rivalry:
Both the regions have a presence of huge completion because of the number of rival
firms that makes the product offering at a competitive price. Besides, each of the firm within the
two regions set a dynamic pricing strategy that keeps on fluctuating with attractive discounts and
price cuts. This is being done to pull the potential consumers out of the market.
Speaking about the suppliers, there is also a huge presence of the local as well as
international basis suppliers. However, there is a need to safeguard the interest of the suppliers in
order to make sure that the distribution channels stay on the positive side.
Figure: trends in e-commerce market in the region of Auckland
Source: (http://archive.stats.govt.nz, 2019)

8ANALYSIS OF THE BUSINESS ENVIRONMENT
Figure: trends in the e-commerce market in the region of Northland
Source: (http://archive.stats.govt.nz, 2019)
IV) Market demand for the goods/services:
The market is stable for the e-commerce business as the economy has the potential to pay
for the consumption of the goods. On the other hand, the DGP of the concerning economy is on
the positive side. This resembles that the economy is in favour of consumption pattern.

9ANALYSIS OF THE BUSINESS ENVIRONMENT
Figure: Consumer purchasing index of Auckland
Source: (http://archive.stats.govt.nz, 2019)
Figure: Consumer purchasing index of Northland
Source: (http://archive.stats.govt.nz, 2019)

10ANALYSIS OF THE BUSINESS ENVIRONMENT
V) The attractiveness of the location (e.g., tax, culture, climate):
The prevailing tax structure is bearable. Another positive point is that the tax structure does not
keep on fluctuating frequently. This is an indication that there lie much of the business prospects
for the e-commerce platform.
Speaking in terms of the consumer culture, the people are addicted to the e-commerce platform
because of the convenience and ease of the purchasing activity.
Give weight to each of the criteria and justify differential of weighting based on your
research findings and based on the need of your business.
However, in comparison to both the countries taking into consideration the nature of the
business that is e-commerce the market is much favourable for the Northland area. As the
market, purchasing ability, and that of the present government tax structure are much more
positive in comparison to that of the Auckland area.
Perform a factor-rating method to evaluate the suitability of the locations and select the
most suitable location out of the two locations.
The factor rating will be undertaken for the two different destinations to evaluate the
potential to sustain the concerning business firm in the chosen destination.

11ANALYSIS OF THE BUSINESS ENVIRONMENT
Problem 3:
As a production manager of RMC, what do you recommend? Why? Support your
recommendation using arguments, such as short-term costs VS long term benefits, scale
effects. You do not necessarily need to do any calculation for this problem but write your
recommendation using the arguments as suggested or based on similar arguments.
A reduction, because of higher utilization, should take place in the number of pieces of
machinery. The firm should be able to go from 15 to about 4 machines, and personnel should go
from 15 to perhaps as low as 3. Similarly, floor space reduction will go from 20,000 square feet
to about 6,000 by making use of the flexible manufacturing system (FMS). On the other hand,
Rotorua Manufacturing Corporation (RMC) is less efficient because of the space area that it
takes and the time it takes in carrying out the desired activity. On the other perspective, $3
million expenditure on machinery and the transfer machines will handle about 30% of RMC’s
work. The reduction in the inventory is predicted to be about a one-time $750,000 savings, and
annual labour savings should be in the neighbourhood of $300,000. This it is being concluded
that making use of the flexible manufacturing system (FMS) will be more profitable in the long
run phase.
Compare and contrast the benefits and costs of using the apple-picking robot and present
your report.
This automation technology will help in overcoming with the manual labour cost.
Besides, much of the cost will be saved regarding the various reporting activities. This
automation process will carry out the desired activity that is being assigned. Besides, the
additional cost that is being associated with that of the advance payment also gets eliminated by
making use of this specific automation process. On the other contrary, it helps in the efficient

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harvesting of the products. The use of this automation mechanism will ensure profitable
outcomes and profitability of the firm.
Besides, making use of the apple-picking robot helps in eliminating the dependency upon
the local union workers for the achievement of the desired activity. Besides, there is an
achievement of the satisfaction by not depending on the external or third parties for the
completion of the activity. It will help in the harvesting process, by making use of this specific
technique it will ensure that the quality of the products is satisfactory. It will also eliminate the
number of wastage that is being harvested. Besides, by making use of this automation technique,
it will ensure that within the coming era of time more profits will be achieved. It is being
predicted that 60% of the labour cost takes place upon the manual labour force such that
additional costs are also involved within the entire process. Besides, the additional cost is also
very high to some extent at different points of time.

13ANALYSIS OF THE BUSINESS ENVIRONMENT
Bibliography
Gujarati, D.N., 2018. Linear Regression: A Mathematical Introduction (Vol. 177). SAGE
Publications.
Wooldridge, J.M., 2015. Introductory econometrics: A modern approach. Nelson Education.