Analysis of Business Performance and Customer Preferences

This research project delves into comparing sales volume and profitability between internal and external coffee outlets of a company. It examines how differing costs such as rent affect profitability margins. The study also explores growth prospects within the external customer segment due to its higher number but lower per-outlet profitability compared to internal outlets. Furthermore, it analyzes evolving consumer preferences in coffee bean choices over time, highlighting shifts from Sublime to Espresso and Mocha, reflecting changing market dynamics.

Research Enquiry For Managers
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TABLE OF CONTENTS
Executive Summary...................................................................................................................1
Introduction................................................................................................................................2
Background and Context............................................................................................................2
Methodology..............................................................................................................................2
Task 1.........................................................................................................................................3
Business Question..................................................................................................................3
Analysis Plan..........................................................................................................................3
Data Collection.......................................................................................................................3
Derive Insights........................................................................................................................3
Recommendations..................................................................................................................4
Task 2.........................................................................................................................................4
Business Question..................................................................................................................4
Analysis Plan..........................................................................................................................4
Data Collection.......................................................................................................................4
Derive Insights........................................................................................................................4
Recommendations..................................................................................................................6
Task 3.........................................................................................................................................6
Business Question..................................................................................................................6
Analysis Plan..........................................................................................................................6
Data Collection.......................................................................................................................7
Derive Insights........................................................................................................................7
Recommendations..................................................................................................................7
Summary....................................................................................................................................8
References..................................................................................................................................9
Appendix..................................................................................................................................10
Peer Review..........................................................................................................................10
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Executive Summary
The company “Sublime Delight” is a coffee supplier headed by David Geoff. Recently, the
general manager responsible for business management has left leaving the business in crisis.
This report has been produced based on the datasets collected by the ex-general manager and
is directed towards the board. The BADIR methodology is used for achieve the specific tasks.
The sales data reflect that highest growth and profitability has been observed for external
customers. Further, in terms of customer service and coffee, the quality of the two selected
outlets has been found to be comparable based on the sample data collected from customers.
Also, the beans sale mix has undergone quite a significant change which is reflective of
changing taste mix of the consumers.
Introduction
The aim of the given report is to analyse the given datasets in order to answer the business
question that is expected to be answered. To achieve the same statistical analysis which
includes both descriptive and inferential techniques have been used. The inferential
techniques have been utilised where sample data has been provided and inference about the
population ought to be derived. The given report highlights the analysis technique along with
the output and seeks to provide useful recommendations which are summarised at the end.
Background and Context
The given case pertains to a company named “Sublime Delight” which is a coffee roaster and
supplier with rapid growth in the past. The general manager in-charge of the business
management has left leaving a huge mess behind. In order to cope with this situation, David
Geoff(owner) has allowed me to complete the Think Internship activity with his company.
Further, certain datasets collected by the previous general manager have also been provided.
The objective assigned is to analyse the data and present the results in the form of a business
report for the Board of Directors.
Methodology
In order to analyse the provided datasets, the BADIR methodology has been used. This
methodology id quite systematic and hence been preferred. It starts by defining the business
question to be explored followed by the plan to conduct analysis. Further, brief about the data
collection is added before derive insights on the basis of analysis which eventually lead to
recommendations for the business (Flick, 2015). This methodology has been adhered for all
the three tasks as outlined below.
Task 1
Business Question
The objective is to analyse the patterns of sale across various different formats (i.e. external
customers, internal outlets and mobile set-ups) in order to comment on the distribution of
sales and profits and additionally identify the key avenues of growth.
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Analysis Plan
In order to answer the above business question, the sales volume trend along with the
respective costs and sales price need to be analysed. This is especially imperative as based on
the sales volume of coffee beans, the sale price and cost tend to vary, thus, having an impact
on the profitability which needs to be identified from the collected data.
Data Collection
The given data summarises the monthly sales in relation to the coffee beans sold to 17
external customers, 7 internal carts and 3 mobile setups and have been derived from the
records of the company i.e. Sublime Delight. Further, additional data has been provided in
relation to the costs and selling price of coffee beans for the company which can enable
determination of profitability for different customers.
Derive Insights
From the given data, it is apparent that the maximum sales are being derived by the internal
carts which have made sales in excess of 80 kg every month for each of the outlet. Hence, the
sale price charged by the internal carts would be the lowest at $ 38/kg. Further, for most of
the duration, the total sales for the internal carts lie between 651-800 kg which implies that
the total cost of beans along with processing cost would be $17/kg which for the October to
December period would reduce to $ 15.5/kg.
The price realisation for external customers would be higher considering that sales for each
customer is lower and hence price would be higher. However, on a cumulative basis, the sales
of the external customers are comparable to the internal outlets and hence the cost structure
would be similar thereby resulting in highest profitability. The amount of sales achieved for
the mobile vans is significantly lower than the external customers and outlets but the same
can be attributed to the less number of mobile units in comparison to the external customers
and internal carts.
Additionally, the growth prospects need to be identified for which the growth of sales during
the twelve months can be used as an estimator.
Growth in sales to external customers from January to December = [(919-640)/640]*100 =
43.59%
Growth in sales to internal outlets from January to December = [(842-670)/670]*100 =
25.67%
Growth in sales to mobile carts from January to December = [(242-189)/189]*100 = 28.04%
Recommendations
It is apparent from the above discussion that the sales volume for external customers is
comparable to that generated by internal outlets. However, the sales volume per
outlet/customer is higher for internal outlets as compared to external customers. But the
profitability tends to be maximised for the external customers where the pricing is higher and
the costs are similar to internal outlets. Further, going forward, it makes sense for the
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company to focus on external customers as this segment is witnessing the highest growth and
also is the most profitable.
Task 2
Business Question
The objective is to opine if the quality of customer service and coffee tends to show
significant difference or not.
Analysis Plan
It is essential the sample data is required. Based on the sample data, requisite inferential
statistic technique would be conducted in order to derive conclusion with regards to
population. For this hypothesis testing seems to be appropriate means and the same would be
executed (Koch, 2013).
Data Collection
Through a customer survey, data has been collected for two particular internal outlets denoted
by 1 and 2. The two main variables of interest are the customer quality and the coffee
quality, which have been measured on a scale of 1 to 5 which 1 indicating poor and 5
indicating excellent. Further, data is regards to frequency of purchase of coffee has also been
collected from the survey participants for the two outlets.
Derive Insights
Hypothesis Testing (Customer Service Quality)
Null Hypothesis (Ho): μ1 = μ2
Alternative Hypothesis (H1): μ1 ≠ μ2
As no information about population standard deviation in relation to customer service quality
is known hence the appropriate test statistic would be t and not z. Two independent sample t
test with unequal variances has been performed in excel which has led to the following output
(Eriksson and Kovalainen, 2015).
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Assuming a significance level of 5%, it is apparent that the available evident does not warrant
rejection of null hypothesis. This is primarily because the relevant two tail p value (0.083) is
greater than the level of significance (0.05%). Hence, the alternative hypothesis cannot be
accepted in this case (Hair et. al., 2015).
Hypothesis Testing (Coffee Quality)
Null Hypothesis (Ho): μ1 = μ2
Alternative Hypothesis (H1): μ1 ≠ μ2
The same test as before would be performed before owing to the reason explained previously.
Assuming a significance level of 5%, it is apparent that the available evident does not warrant
rejection of null hypothesis. This is primarily because the relevant two tail p value (0.141) is
greater than the level of significance (0.05%). Hence, the alternative hypothesis cannot be
accepted in this case (Koch, 2013).
Recommendations
From the above analysis, it would be appropriate to conclude that there is no significant
statistical difference between the customer service and coffee quality between the chosen two
internal outlets. This is based on the given sample data in relation to the customers from the
two outlets.
Task 3
Business Question
The objective of the given task is to opine on the beans mix which is being provided to the
external outlets and to understand if there is a changing trend in this regards.
Analysis Plan
In order to analyse the above business question, data for the month of December and January
need to be analysed keeping in mind the historical beans mix to see any deviation from the
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established pattern and then based on the above, future trends in terms of beans mix can be
commented on.
Data Collection
The data has been provided for the external outlets beans sale mix for the 17 external outlets
for a period of two month i.e. January 2016 and December 2016. This data would be used to
conduct statistical analysis and provide answers in relation to the business question.
Derive Insights
The historical market analysis suggest that bean mix sale comprised of Espresso, Mocha and
Sublime with an estimated share of 30%, 10% and 60% respectively. The breakup of sales for
December and January from external outlets is summarised below.
The prediction regarding the proportion mix does hold not hold exactly true for January 2016.
Also, it is correct to the extent that Sublime variety accounts for majority of the sales while
Mocha has the lowest contribution to the sales. But it seems that there is a shift towards
Espresso and Mocha from Sublime.
The above trend is confirmed from the sales figure witnessed in December 2016 where
Espresso sales have overtaken Sublime marginally. Also, the share of Mocha has been
growing at the expense of Sublime. Hence, the sales mix of beans does not confirm with the
historical prediction carried out in 2015 and clear highlights changing preferences on the part
of the consumers which is captured in the sales mix of the external outlets.
On the basis of the expected sales mix in December, it would be fair to assume a sales mix of
Espresso, Mocha and Sublime to the tune of 40%, 30% and 30% respectively. It is
noteworthy that while predicting the trends it is assumed that some shift towards Espresso
and Mocha would be visible in the near future which has been taken into account.
Recommendations
Based on the above, it is apparent that there is a gradual but significant change in bean sales
mix which is being observed from the historical prediction in 2015. This is reflective of the
shift in taste mix which is apparent from the significant variation in mix observed between
January 2016 and December 2016. Hence, the company also needs to shift the production
pattern accordingly.
Summary
The overall sales volume generated per outlet/customer is highest for internal outlet but
owing to higher number of external customers, the total sales for both external customers and
internal outlets in comparable. However, in terms of profitability and growth, it is the
external customer segment which leads. Also, the result of the comparison of the coffee and
customer service quality in two selected internal outlets with sample survey data did not
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reflect any significant difference which augers well for the company. Besides, the bean sales
mix to the external customers is undergoing a change as the share of Espresso and Mocha is
increasing while that of Sublime is decreasing. This is clearly evident from the sales mix data
of December which reflects the changing taste mix of customers. Going forward, it is
expected that the sales of Espresso, Mocha and Sublime would be in the ratio of 4:3:3.
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References
Eriksson, P. and Kovalainen, A. (2015) Quantitative methods in business research. 3rd edn.
London: Sage Publications.
Flick, U. (2015) Introducing research methodology: A beginner's guide to doing a research
project. 4th edn. New York: Sage Publications.
Hair, J. F., Wolfinbarger, M., Money, A. H., Samouel, P., and Page, M. J. (2015) Essentials
of business research methods. 2nd edn. New York: Routledge.
Koch, K.R. (2013) Parameter Estimation and Hypothesis Testing in Linear Models. 2nd edn.
London: Springer Science & Business Media.
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Appendix
Peer Review
Student 1
I was responsible for Task 1 along with the summary. I gave useful inputs on the other tasks
with which group members were entrusted with. Also, at the end the grammar check and
spelling check was carried out by me.
Student 2
I was responsible for Task 2 along with the introduction and methodology. I also acted as the
group leader and was responsible for the overall coordination between the group. I was an
active contributor to the group by facilitating brain storming and finalising the responsibilities
of each of the members as per their comfort levels with the given tasks.
Student 3
I was responsible for Task 3 along with the executive summary. Besides, I also did the report
compilation by integrating the work performed by the team members. At the discussion stage
prior to the distribution of work, I was responsible for coming up with creative ideas about
work distribution so as to ensure that nobody is excessively burdened.
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