DG Fashion Expansion Project Report

This assignment examines the feasibility of DG Fashion's expansion plans. It involves analyzing market trends, customer spending habits, historical sales data, and financial projections to determine the profitability potential of two proposed locations: Hammersmith and Knightsbridge. The report also incorporates a critical path analysis for project setup and compares the Internal Rate of Return (IRR) for both investments.

Business Decision-making

Table of Contents
INTRODUCTION...........................................................................................................................1
1.1 Plan for data collection..........................................................................................................1
1.2 Survey methodology and sampling frame.............................................................................1
1.3 Questionnaire.........................................................................................................................2
TASK 2............................................................................................................................................4
2.1 Calculation of mean, mode and median.................................................................................4
2.2 Explain the significance of the central tendency results........................................................5
2.3 Calculation of range and standard deviation..........................................................................6
2.4 Calculation of quartile, percentiles and correlation coefficient to draw useful information. 7
TASK 3............................................................................................................................................8
3.1 Column graph for sales, cost and profit data.........................................................................8
3.2 Forecasting future sales and profit of DG Fashion................................................................9
3.3 Power Point Presentation.....................................................................................................10
3.4 Formal report........................................................................................................................15
TASK 4..........................................................................................................................................16
4.1 Information processing tools................................................................................................16
4.2 Project management.............................................................................................................16
4.3 Assessing project viability of new expansion project..........................................................18
CONCLUSION..............................................................................................................................20
REFERENCES..............................................................................................................................21

INTRODUCTION
In current uncertain and competitive world, managers need to make precise and informed
business decisions for ensuring long-lasting survival. It involves number of decisions like
product development, expansion and others. The current research study focuses in the area of
decision making for a new clothing retail firm DG Fashions expansion in Wembley Central.
Although, the company had gained good popularity for its strong competitive position at
affordable rates. In this regards, both primary and secondary data will be gathered and examined
thoroughly using statistical methods of central tendency and dispersion. However, for the
financial appraisal, financial viability will be assessed through investment appraisal method to
examine the viability of the expansion project.
1.1 Plan for data collection
There are two sources from where DG Fashion can extract needed information, primary
and secondary data sources.
Primary data: This method collects data from first hand sources through the use of
observation, experiments, surveys, observation, interview, schedule and others. Thus, such
sources are not subjected to any kind of processing and manipulation (Solomon 2014). In order
to assess people’s perception, demand and preferences for expanding DG Fashion in Wembley
Central, target respondents, consumers will be surveyed through questionnaire. The key benefit
of the method is it produce reliable information, sin contrast, it is time-saving and costlier way of
data collection
Secondary data: Data that is gathered by someone else other than the original user is
known as secondary data includes books, magazines, trade journals, online publications,
company’s own records, industry reports and statistical documents. However, on the other side,
secondary dataset will be gathered through DG Fashion’s past 10 years sales, cost and profit
records. It will help to examine company’s performance and to make informed decisions. It is an
economical and time-saving method of gathering needed data set.
1.2 Survey methodology and sampling frame
Survey methodology: It is a primary data collection method wherein an original survey of
the actual respondents is carried out who are supposed to have desired set of information. It is
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considered as highly effective information that produces relevant information regarding socio-
economic characteristics, product features, consumer opinion, motives, and attitude and
satisfaction level as well. Questionnaire is the best way which consists of number of questions
which selected sample respondent need to respond. It is simpler, cost-effective and easy to
administer (Solomon, 2014). Thus, for DG Fashion’s expansion in Wembley central, it is
decided to survey people via questionnaire to get an idea about their like, dislike, price
sensitivity, purchasing preferences, pattern, income level and other needed information.
Sampling frame: Finding difficulties in studying the universe or population, sampling
introduced. It is a way wherein a sample comprising group of people are taken out who will be surveyed
by the company. There are two ways to choose a sample, random and non-random sampling. First method
identifies each and every unit of the population equally and similar probability, unlike this, in later, every
unit has less or more likelihood to be included in the sample selection. Here, it is decided to select sample
of 175 people using random-sampling method to avoid biasness in the sample selection.
1.3 Questionnaire
Name:
Town:
Gender: M ( ) F ( )
Age:
 18 and below
 19 – 25 years
 26 – 32 years
 Above 32 years
From Where, do you often purchase apparel?
 Online shopping
 Independent shops
 High street brands
 Doesn’t matter
How often do you purchase clothing products?
 1-5 times a year
 5 -10 times a year
 Once in a month
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 2 – 3 times per month
 4-7 times per month
 More than 7 times in a month
How much do you generally spend on cloth shopping?
 £0 - £20
 £20- £40
 £40- £60
 £60 - £80
 £80 - £100
 £100- £120
 £120 - £140
Which are the two most important factors in your clothing shopping?
 Quality
 Comfort
 Color
 Material
 Brand
 Price
 Style
With whom, do you prefer shopping clothing items?
 Friends
 Family
 Partner
 Colleague
 Alone
 Can’t say
Whenever you purchase any cloth item, do you:
 Always prefer visiting again the shop
 Every time try different shops
 Visit in a shop due to window display
 Prefer locations with attractive discounts
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 Others
If there is a new cloth brand coming to your city, which would you expects:
 Celebrity’s style design
 Organic material
 Premium quality
 Reasonable charges
 Others
TASK 2
2.1 Calculation of mean, mode and median
Weekly expenditures Number of customers (F) Mid value FX CF
0-20 19 10 190 19
20-40 27 30 810 46
40-60 39 50 1950 85
60-80 26 70 1820 111
80-100 22 90 1980 133
100-120 23 110 2530 156
120-140 19 130 2470 175
∑F = 175 ∑FX = 11750
Average: In descriptive statistics, it is the most important statistical measures of central tendency
which find out average of the given number or series (Zheng and et.al., 2016).
Average = ∑FX/∑F
= 11,750/175
= £67.14
Thus, average weekly expenditure in Wembley Central by one customer on shopping
behavior is found to £67.14.
Median: It is the mid value that means value that is equal to 50% of the data-series.
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m = Value of (∑F/2)th item
= (175/2)th item
= 87.5
It lies in CF of 111 in the class interval of £60-£80.
M =L 1+( N /2)−c/ F∗i
M =60+(87.5−85)/26∗20
¿ £ 61.92
Thus, middle value of weekly expenditures by consumers in Wembley Central is £61.92.
Mode: The item or value which has largest frequency is called as mode of the series
(Newbold, Carlson and Thorne, 2012). In the series, highest frequency is 39 that lies in the group
of £40-£60.
Z=L1+(F 1−F 0)/(2 F 1−F 0−F 2)∗i
¿ £ 40+(39−27)¿ ¿∗20
¿ £ 40+ £ 9.6
¿ £ 49.6
According to the results, maximum people at Wembley Central spend £49.6/week on buying
habits.
2.2 Explain the significance of the central tendency results
The above central tendency measurement found that considering average measures, it is
identified that people spend around £67.14/week on cloth shopping behavior. It means that
spending level revolve near to that value, thus, as per this, in order to generate more value, DG
Fashion needs to bring something uniqueness or offer premier quality products that are not
offering by competitor at Wembley Central. By this way, user can be easily attracted with greater
spending level. However, median (50%) of total spending is found to £61.92 little bit less than
average. However, on the other side, maximum buyers spend just £49.6 on apparel shopping
which is even less than average spending (Berman and Wang, 2017). Thus, not only the premium
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quality products but also proper marketing both in-house and out-house seems really important
to attract crowded people at the prospective location and build competitive position.
2.3 Calculation of range and standard deviation
Range=maximum expenditure – minimum expenditure
¿ £ 140−£ 0
¿ £ 140
Range is a measurement of dispersion which is derived by subtracting the highest value with the
lowest one. For DG Fashion, maximum and minimum weekly expenditure on buying clothing product is
£140 and nil at a range of £140.
Weekly
expenditures (£)
Number of
customers (F) Mid value Dx = X-A Fdx FDX2
0-20 19 10 -60 -1140 68400
20-40 27 30 -40 -1080 43200
40-60 39 50 -20 -780 15600
60-80 26 70 0 0 0
80-100 22 90 20 440 8800
100-120 23 110 40 920 36800
120-140 19 130 60 1140 68400
175 0 -500 241200
Standard deviation=√ ¿
¿ √ 241,200/175 – (−500) 2/1752 ¿
¿ √ 1,378.28 – 250,000/30,625
¿ √ 1378.28 – 8.16
¿ 37.01
Standard deviation is the most useful and important statistical measure of scatter or
dispersion that take into account difference arithmetic or assumed mean from each and every
value (Berenson and et.al., 2012). Looking to the results, it is found that S.D. is 37 which
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demonstrates that scatter level of consumer expenditure on apparel product is very high. Some
spend too much whereas some people spend very low on clothing items.
2.4 Calculation of quartile, percentiles and correlation coefficient to draw useful information
q1 = value of (N/4)th item
= (175/4)th item
= 43.75 lies in CF of 46 lies in £20-£40 weekly expenditure.
Q 1=L 1+( N / 4)– C/ F∗i
¿ £ 20+(43.75 – 19)/ 27∗20
¿ £ 38.33
q2 = Value of 2(N/4)th item
= 87.5 lies in CI of £60-£80.
Q 2=L 1+ 2( N /4) – C / F∗i
¿ £ 60+87.5 – 85/26∗20
¿ £ 61.92 ’
q3 = Value of 3(N/4) th item
= 3(175/4)th item
= 131.25 lies in CI of £80-£100.
Q 3=L 1+3(N / 4)– C /F∗i
¿ £ 80+(131.25 – 111) /22∗20
¿ £ 80+£ 18.41
¿ £ 98.41
As per the finding, 1/4th, 50% and 3/4th of the spending is £38, £62 and £98/per week.
Correlation: As name suggests, this statistical measure presents relationship or
association between two different but interlinked components i.e. sales and profit. It is obvious
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that, as consumer in Wembley Central spend more on cloth items, DG Fashion will generate
more sales revenues or vice-versa.
TASK 3
3.1 Column graph for sales, cost and profit data
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
0
5
10
15
20
25
30
35
40
45
50
20 23 24
30 31 31 32 35
39
43
12 13 15 16 19 21 22 24 25 27
8 10 9
14 12 10 10 11 14 16
Sales, cost and profit
Sales (In £m) Cost (In £m) Profit (In £m)
According to the results, it is seen that over the period, DG Fashion had generated
increased turnover through its quality products which is available at economical or reasonable
rates to all the users. However, still, sales changes at a volatile rates as in 2008, it grown up by
15% and in next year, the rate of sales increase was just 4.35%. Again in next year, company had
achieved good growth in sales by 25%. During this period, DG Fashion also maintained good
control over their cost also which maximizes its profit by 56% increase indicates that firm
performed excellent and remarkable. Thereafter, till end of 2013, performance was not good
even dropped because of high rate of increase in cost may be to pricing pressure of suppliers,
high transportation cost and poor control of managers (Babajana and Phillips, 2016). However,
in 2014 and 2015, YOY growth in profit was 10% and 27% which in next year, came to 14.29%.
It is because of challenging market, economic factors, changing preferences of the society and
competitive luxury retail market in UK.
3.2 Forecasting future sales and profit of DG Fashion
Forecasting future is also now important because prediction aware managers about possible
consequences and also present future outlook of business performance.
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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
0
5
10
15
20
25
30
35
40
45
50
20
23 24
30 31 31 32
35
39
43
f(x) = 2.3030303030303 x + 18.1333333333333
R² = 0.952079542157871
Sales performance
Looking to above line graph, it is seen that in 2010, sales suddenly gone at peak level, thereafter,
in following year, just increased by 1GBP million and remains cost in next year, afterwards continuously
increased and came to 43GBP million in 2016. Actual sales volume for FY 2016 is above the trend line,
growing or upward direction as represented by trend line predicts that future sales will be increase further.
It can be justified because, expansion, quality products, new style and design will enable DG Fashion to
boost sales.
2017 :2.303 x+18.133
¿ 2.303(11)+18.1333
¿ £ 43.46 m
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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
0
2
4
6
8
10
12
14
16
18
8
10 9
14
12
10 10 11
14
16
f(x) = 0.581818181818182 x + 8.2
R² = 0.478206724782067
Profit performance
2017 :0.5818 x+8.2
¿ 0.5818(11)+8.2
¿ £ 14.59
As per the results 2010 shows sudden peak in profit to 14GBP million due to grown sales
at controlled cost. Thereafter, it decreased and again it came on track in 2015 and 2016 shown
highest profit of £16GBP million in the last decade. It clearly demonstrates that in coming
period, although, greater sales volume, expansion into new markets, quality and innovative
design of apparel will attract more buyers, still, increase in cost due to inflation and high bargain
power of suppliers may affect profit adversely. According to the results, it is expected that profit
will go to £14.59m in 2017.
3.3 Power Point Presentation
Slide 1
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Slide 2
Slide 3
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Speaker Notes: According to the results, it is seen that over the period, DG Fashion had
generated increased turnover through its quality products which is available at economical or
reasonable rates to all the users. However, still, sales changes at a volatile rates as in 2008, it
grown up by 15% and in next year, the rate of sales increase was just 4.35%. Again in next year,
company had achieved good growth in sales by 25%. During this period, DG Fashion also
maintained good control over their cost also which maximizes its profit by 56% increase
indicates that firm performed excellent and remarkable. Thereafter, till end of 2013, performance
was not good even dropped because of high rate of increase in cost may be to pricing pressure of
suppliers, high transportation cost and poor control of managers (Babajana and Phillips, 2016).
However, in 2014 and 2015, YOY growth in profit was 10% and 27% which in next year, came
to 14.29%. It is because of challenging market, economic factors, changing preferences of the
society and competitive luxury retail market in UK.
Slide 4
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Slide 5
Speaker notes: Looking to above line graph, it is seen that in 2010, sales suddenly gone
at peak level, thereafter, in following year, just increased by 1GBP million and remains cost in
next year, afterwards continuously increased and came to 43GBP million in 2016. Actual sales
volume for FY 2016 is above the trend line, growing or upward direction as represented by trend
line predicts that future sales will be increase further. It can be justified because, expansion,
quality products, new style and design will enable DG Fashion to boost sales.
Slide 6
Speaker notes: As per the results 2010 shows sudden peak in profit to 14GBP million
due to grown sales at controlled cost. Thereafter, it decreased and again it came on track in 2015
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and 2016 shown highest profit of £16GBP million in the last decade. It clearly demonstrates that
in coming period, although, greater sales volume, expansion into new markets, quality and
innovative design of apparel will attract more buyers, still, increase in cost due to inflation and
high bargain power of suppliers may affect profit adversely. According to the results, it is
expected that profit will go to £14.59m in 2017.
Slide 7
Slide 8
Slide 9
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3.4 Formal report
To: DG Fashion, Line Manager
From: Business analyst
Date: 26th November 2017
Subject: Analysis of historical business performance
Introduction
The report is writing with the aim to examine DG Fashion’s progress over last decade
and also predict future results.
Methods
Graphical presentation including line and column graph is used for analysis, along with this,
trend line is used for forecasting profit and sales in following year 2017.
Results
 It is found that in 2008, DG Fashion performed excellent with 15% growth in revenues and
56% yearly growth in profitability with tight control over expenditures.
 Afterwards, tough market challenge, rivalries, new entrants in the market, differentiation,
inflation and other factors affected success adversely.
 Again, in 2015, DG Fashion reported 27% YOY growth in profit which in following year,
decreased. Although sales shown good performance still, cost overrun affected profit
negatively.
Recommendation
 It is suggested to firm to make cost-cutting measures to minimize cost for boosting net
profit.
 Expansion into new market will also facilitate the entity to boost its progressive results.
TASK 4
4.1 Information processing tools
Management information system: In technology led world, MIS is of great use, in a
nutshell, it is defined as a collection of hardware, software, systems, people and procedure which
all work together so as to record, store, summarize and produce customized reports (Laudon and
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Laudon, 2011). DG Fashion can use MIS to store and process all the business information and
data and establish stronger communication within and outside the company with consumers,
suppliers and others.
Transaction processing system: As name implies, it is used to process or retrieval
business transactions. DG Fashion can use it as an information processing system to gather,
modify and retrieve dataset including performance, consistency and reliability (Safwan,
Meredith. and Burstein, 2016).
Executive information system: It is a decision-support system that is especially useful for
top-level managerial team of an organization. DG Fashion’s senior executives and head can use
it to get easier access of relevant set of information for the purpose of fulfilling strategic business
goals (Sperl-Hillen and et.al., 2016).
4.2 Project management
DG Fashion’s CEO has found the best location for new outlet in Wembley Central and
consult with an architect to generate an idea about possible period of constructing a new outlet in
the city. MS project management is a software that help companies in successful project
management. In this, gantt chart represent multiple of activities that the outlet construction
project will need at different duration. It also presents relationship with the other functions and
maintain coordination.
Task Name Duration Start Finish Predecessors Total Slack
Lay foundation and
building structure 75 days Nov 27 '17 Mar 9 '18 0 days
Build walls 25 days Mar 12 '18 Apr 13 '18 1 30 days
Build Windows 8 days Mar 12 '18 Mar 21 '18 1 47 days
Build roof 40 days Mar 12 '18 May 4 '18 1 15 days
Build Stairs 20 days Mar 12 '18 Apr 6 '18 1 35 days
Plastering 55 days Mar 12 '18 May 25 '18 1 0 days
Electrical 80 days May 28 '18 Sep 14 '18 2,3,4,5,6 0 days
Heating 65 days May 28 '18 Aug 24 '18 2,3,4,5,6 15 days
Plumbing 60 days May 28 '18 Aug 17 '18 2,3,4,5,6 20 days
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Carpenter 67 days May 28 '18 Aug 28 '18 2,3,4,5,6 13 days
Decorating 45 days Sep 17 '18 Nov 16 '18 6,7,8,9,10 0 days
Floor covering 30 days Sep 17 '18 Oct 26 '18 6,7,8,9,10 15 days
Gantt chart
Network diagram: This is of best use to determine critical path that is the longest path of
completion of project (Heagney, 2016). The most important thing about critical activities is they
have no slack or float, means never be delayed by a single day, otherwise, cause project delay.
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Activities 1, 6, 7 and 11 are in critical path at a total duration of 75 + 55 + 80 + 45 = 255
days (Critical path analysis, 2014).
4.3 Assessing project viability of new expansion project
Net present value: It is a discounting method of investment appraisal which use cost of
capital as a factor for discounting and then future cash flows are discounted to know current time
value. Surplus of total discounted cash inflows over required initial outlay is called NPV
(Dellavigna and Pollet, 2013).
Year
Hammersmit
h
Knightsbridg
e Discoun
t factor
Hammersmith Knightsbridge
NCF
(GBP000s)
NCF
(GBP000s)
Discounted
cash flow
Discounted cash
flow
1 130 150
0.95238
1 123.81 142.86
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2 120 130
0.90702
9 108.84 117.91
3 150 140
0.86383
8 129.58 120.94
4 160 100
0.82270
2 131.63 82.27
5 150 140
0.78352
6 117.53 109.69
Sum of discounted cash inflows 611.39 573.67
Less: Beginning investment 500.00 500
Net present value 111.39 73.67
As per the results, Hammersmith is found possibly with greater return by having NPV of
111.39. Thus, it is better to open new outlet at Hammersmith location.
Accounting rate of return: This method is based on use of accounting profit and
determine profit percentage on initial investment required by DG Fashion for opening a new
outlet.
ARR=Average accounting return /Investment∗100
Hammersmith=(710 /5)/500∗100
¿ 28.4 %
Knightsbridge=(660/ 5)/500∗100
¿ 26.4 %
Above result determined that Hammersmith will generate comparatively higher return of
28.4%, thus is more worthful.
Payback period: This method is about determining recovery period of the beginning cash
outlay, a risk averse investors always prefer quick recoupment (Herbener and Rapp, 2016).
Year Hammersmith Knightsbridge
NCF (GBP000s) CCF NCF (GBP000s) CCF
Investment -500 -500 -500 -500
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1 130 -370 150 -350
2 120 -250 130 -220
3 150 -100 140 -80
4 160 60 100 20
5 150 210 140 160
Total 710 660
Hammersmith=3 year+(100/160)
¿ 3+0.625
¿ 3.625 year
¿ 3 year 7.5 months
Knightsbridge=3 year +(80/100)
¿ 3.8 year
3 year 10 months
First location will quickly get back its beginning cash outlay in just 3 year 7.5 months,
hence, opening a new outlet at such location is preferable choice.
Internal rate of return: It is a rate which equates sum of discounted value to initial
required investment.
Year Hammersmith Knightsbridge
NCF (GBP000s) NCF (GBP000s)
Investment -500 -500
1 130 150
2 120 130
3 150 140
4 160 100
5 150 140
IRR 12% 10%
As per the results, Hammersmith’s IRR is 12%, 2% higher than Knightsbridge, hence,
first project is much better option.
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CONCLUSION
The study carried above found that maximum number of people do not spend enough
amount over shopping of clothing products as mode is comparatively less than mean weekly
spending. Therefore, premium quality, organic material and in-house and out-house marketing
factors can facilitatie DG Fashion to launch expansion successfully. However, historical progress
shown many ups and downs, still, in future, sales is expected to grow and by strong control over
cost, profit also can be increased. In order to set up and infrastructure the location, firm will take
around 255 days and it is better to invest money in Hammersmith with strong viability.
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REFERENCES
Books and Journals
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higher education AU.
Berman, E. and Wang, X., 2017. Essential statistics for public managers and policy analysts. Cq
Press.
Dellavigna, S. and Pollet, J.M., 2013. Capital budgeting versus market timing: An evaluation using
demographics. The Journal of Finance. 68(1). pp.237-270.
Heagney, J., 2016. Fundamentals of project management. AMACOM Div American Mgmt
Assn.
Herbener, J.M. and Rapp, D.J., 2016. TOWARD A SUBJECTIVE APPROACH TO INVESTMENT
APPRAISAL IN LIGHT OF AUSTRIAN VALUE THEORY. Quarterly Journal of Austrian
Economics. 19(1). pp.10-69.
Laudon, K.C. and Laudon, J.P., 2011. Management information systems (Vol. 8). New Jersey: Prentice
Hall.
Newbold, P., Carlson, W. and Thorne, B., 2012. Statistics for business and economics. Pearson.
Safwan, E.R., Meredith, R. and Burstein, F., 2016. Towards a Business Intelligence Systems
Development Methodology: Drawing on Decision Support and Executive Information
Systems.
Solomon, M.R., 2014. Consumer behavior: Buying, having, and being. Engelwood Cliffs, NJ:
Prentice Hall.
Sperl-Hillen, J.M. and et.al., 2016. A Clinical Decision Support System Promotes Shared
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Centered Research and Reviews. 3(3). p.218.
Zheng, S. and et.al., 2016. The Relationship Between the Mean, Median and Mode with Grouped
Data. Communications in Statistics-Theory and Methods. 10(3). pp.15-36.
Online
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Critical path analysis. 2014. [Online]. Available through: <
https://www.mindtools.com/pages/article/critical-path-analysis.htm>.
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