University of Roehampton: Pecan Peanuts Business Report 2020

This business report for Pecan Peanuts, prepared in May 2020, provides a detailed analysis of the company's operations and potential for expansion. The report begins with an overview of the Australian pecan industry, including market trends and production forecasts for 2021 and 2022. It then delves into health issues related to pecans, peanuts, cashews, and pistachios, followed by an examination of quality assurance conditions for machine working and the costs associated with a new machine. Hypothesis testing is conducted to compare the performance of two machines, and a pros and cons analysis is presented to determine whether to buy a new machine. The report also includes an analysis of customer satisfaction and an initial SWOT analysis regarding possible expansion, concluding with a summary of key findings and recommendations. The report utilizes data from the provided assignment brief, including customer satisfaction data, and incorporates financial calculations such as NPV and payback period to support its conclusions. The report is structured to address the specific requirements of the assignment, including word count and content sections, and is intended to provide valuable insights for Pecan Peanuts' strategic decision-making.

Pecan Peanuts
Business Report

Date: May 2020
Table of Contents
Introduction.............................................................................................................................................1
1. Analysis of Issues forPecan Peanuts.................................................................................................2
1.1 An Overview of theAustralian Pecan Industry................................................................................2
1.2 Linear Forecast of Export Productions for 2021 and 2022..............................................................3
1.3Health Issues in the Pecan, Peanut, Cashew and Pistachio Market.................................................5
1.4Quality Assurance Conditions for Machine Working.......................................................................7
1.5Costs of a New Machine..................................................................................................................8
1.6Hypothesis Testing for the Possible Difference in Two Machines.................................................10
1.7Pros & Cons Analysis “Should we buy a new machine?”...............................................................11
1.8 Customer Satisfaction...................................................................................................................12
1.9 Initial SWOT Analysis about Possible Expansion...........................................................................13
1.10 Summary....................................................................................................................................14
2. References......................................................................................................................................15
3. Appendices.....................................................................................................................................16

Business Report for Pecan Peanuts 2020
Introduction
Pecan produces number of the packaged food products from the man factory in UK. It produces
packets of big size for snacks and big size for home baking. It also produces other nuts products. It
imports the shell on nuts from Australia. Company is performing well in the market and profits have
increased over the period significantly. Company is significant change in the customer taste and
preferences due to trend of health consciousness. They are moving towards healthy snacks these
days. Company is planning to expand the business due to the increase in sales and move of the people
towards healthy snacks.
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Business Report for Pecan Peanuts 2020
1. Analysis of Issues forPecan Peanuts
1.1 An Overview of theAustralian Pecan Industry
Pecans constitute less than five percent of the world tree nuts trade and the consumption is highly
concentrated in US which is their native nut. Demand in Europe, Asia and Middle East is also growing.
Due to this reason market of Pecan has been strong over current period after entry of the China to
world market in early 2000. The intense new interests from China had limited the availability of the
products to other markets in the recent years. There are number of marketable benefits of the pecan
such as high level of the antioxidants that creates demand in the market as people are becoming
health conscious and are moving towards healthy products.
Nationwide production of the pecan orchards are approximately 3000 tonnes. Production increases
are seen after long stagnation period. Global production of the nuts is concentrated in Mexico and US
accounting for around 90% of the crops. Pecans are long lived and it remains highly productive for
over a century that makes them the long term investments. Significant amount of the UK production
for kernel is sold for the domestic consumption with the distribution splits between the retail as well
as manufacturing channels (Brar and Danyluk, 2019). The Farms in country operates the largest
processing plants of pecan in UK from where it makes supplies to London kernel and in shell products
to the domestic & international markets. UK exports of the pecan are sold around the globe from
Europe to North America, Middle East & East Asia.
Pecans in Australia are harvested in Northern hemisphere meaning that the fresh products could be
shipped in major markets pre-Christmas seasons. Pecan industries of Australia have been fortunate in
remaining free from the troublesome scab diseases that blight high production in US. The industry is
growing at rapid speed due to the nutritious contents of the nuts and high demand (Kluczkovski,
2019). It generates considerable revenues from the exports which is expanding the industry over new
regions.
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Business Report for Pecan Peanuts 2020
1.2 Linear Forecast of Export Productions for 2021 and 2022
Table showing forecast for 2021 and 2022
Year' Domestic Export
2014 1.2 11.9
2015 1.4 11.8
2016 1.6 15.8
2017 1.8 15.5
2018 2.1 20.3
2019 2.3 19.7
2020 2.6 25.5
2021 2.8 25.9
2022 3.0 28.1
2014 2015 2016 2017 2018 2019 2020 2021 2022
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Pecan Production
Export
Domestic
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Business Report for Pecan Peanuts 2020
Scatter Diagram
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
0
5
10
15
20
25
30
Domestic
Linear (Domestic)
Export
Linear (Export)
Years
Sales in millions
It could be evaluated that based on the previous years that the production of pecan is increasing
continuously. From the year 2014 there has been a constant growth in the production both for
domestic consumption and for export. However the rise is seen in every two years and not every year,
sales have been increasing due to which industry has also increased the production level from before
(Zhang, and et.al., 2017). On the basis of production till 2020 forecast of the production is made for
year 2021 and 2022. Domestic consumption forecast is 2.8 million for 2021 and 3 million for 2022.
Export production is forecasted as 25.9 for 2021 and 28.1 million for 2022.
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Business Report for Pecan Peanuts 2020
1.3Health Issues in the Pecan, Peanut, Cashew and Pistachio Market
Fat per Ounce (28 grams)
Saturated Fat in
grams
Pecan 20
Peanut 17
Cashew 12
Pistachi
o 12.5
Pecan Peanut Cashew Pistachio
0
2
4
6
8
10
12
14
16
18
20
20
17
12 12.5
Saturated Fat in grams
Saturated Fat in grams
Healthiness of the nuts in sense of the saturates fat contents
Pecan – These are generally used in the desserts but are having nutritious values. As per the
studies it is found that pecan help in lowering LDL cholesterol levels in people with the normal
levels of cholesterol.
Peanuts – Unlike other nuts the peanuts are not the tree nuts as they belong to legume
family but is having similar health benefits and nutrient profiles like tree nuts. Higher intake of
the peanuts is associated with the lower rate of death (Casulli, Calhoun and Schaffner, 2019).
Peanuts though have increased fat levels but helps in improving the risk factors associated
with the heart diseases.
Cashew – These nuts have high nutrient profile. Every ounce of cashew has 12 grams of
saturated fat. Intake of cashews helps in improving metabolic syndrome symptoms. It
improves blood pressure in the people and also increases antioxidant potential in the diet.
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Business Report for Pecan Peanuts 2020
Pistachios – The nuts are highly rich in fibre and have 12.5 grams of fat in one ounce. It
improves the cholesterol level and increases HDL cholesterol level which is good. It also helps
in reducing the rise of blood sugar after meal.
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Business Report for Pecan Peanuts 2020
1.4Quality Assurance Conditions for Machine Working
Old machine New Machine
Probability of break
down 20% 80%
Presently Pecan Peanut is operating with two separate production lines where line uses old machine
where the other uses new machine. After analysing the machines it is found that probability of the
failure of new machine is 20% where probability of failure of the old machine is 80%. As per quality
assurance department is insisting at probability of around 99.99% that one of the machines is working
all the time. Company wants to achieve the condition of six sigma where there is no wastage of the
resources. Each product is accurate and free from errors and mistakes. As company is using two
machines for 99.99% quality assurance it is required to ensure that the machines are working
accurately and without any failure (Picard and et.al., 2020). It has to ensure that the machines are
repaired at proper intervals and proper set up is made before processing next batch. It will increase
the efficiency of the machines and probability of failures is reduced more. The condition could be
satisfied if both the machines are working actively and one machine is repaired while other is working.
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Business Report for Pecan Peanuts 2020
1.5Costs of a New Machine
Calculation of NPV and payback period.
Computation of NPV
Year
Cash
inflows
PV
factor
@ 9%
Discounted
cash inflows
1 24000 0.917 22018.35
2 24000 0.842 20200
3 24000 0.772 18532
4 24000 0.708 17002
5 24000 0.650 15598
6 24000 0.596 14310
Total discounted cash
inflow 107662
Initial investment 96000
NPV (Total discounted
cash inflows - initial
investment) 11662
Computation of Payback period
Year
Cash
inflows
PV factor
@ 9%
Discounted cash
flows
Cumulative
cash inflows
1 24000 0.917 22018.35 22018.35
2 24000 0.842 20200.32 42218.67
3 24000 0.772 18532.40 60751.07
4 24000 0.708 17002.21 77753.28
5 24000 0.650 15598.35 93351.63
6 24000 0.596 14310.42 107662.05
Initial
investment 96000
Payback
period 4
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Business Report for Pecan Peanuts 2020
0.2
Payback
period 4.2 years
From the above calculation it could be found that the NPV of the project is positive 11662. It shows
that the cash flows are enough to repay the loans means for covering the cost of machine. Projects
that have positive NPV are profitable
Payback period of the machine shows that cost could be recovered of the machine in 4.2 years which
is having useful life of 6 years (Fernandes and et.al., 2017). Shorter payback period of the machine is
profitable as it is the breakeven point after which it starts earning profits.
As per the above analysis it could be analysed that company should take loan for 4 years and 2 months
that is 50 months.
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Business Report for Pecan Peanuts 2020
1.6Hypothesis Testing for the Possible Difference in Two Machines
First
machine
Second
machine
Sample 30 40
Mean 180 170
Standard
Deviation 40 10
Z-score -3.75 -13
Interpretation
Hypothesis testing is a statistical method of testing the results of survey or the experiments to analyse
if the results of the two machines are adequate. In this method hypothesis which is testable over basis
of process observed which is modelled through random variables set. Statistical test is method of the
statistical inference. There are commonly two statistical data that are compared with each other or
the data obtained from sampling are compared with synthetic data set from idealised model. For
statistical analysis alternate hypothesis are proposed between 2 data sets and are compared to the
idealised null hypothesis which proposes nil relationship between 2 data sets. Comparison is deemed
to be statistically significant if relationship between data sets is unlikely realisation of null hypothesis
as per threshold probability - significance level. The hypothesis test is used to determine what
outcomes in study will be leading to rejection of null hypothesis for pre specified level of the
significance.
Process to distinguish between null hypothesis & alternative hypothesis is determined by considering
2 conceptual errors. 1st type of the error is seen when null hypothesis is wrongly rejected. Second
error is seen null hypothesis in not rejected wrongly (Król and et.al., 2019). Hypothesis tests are based
over statistical significance which is another method to express confidence intervals. Hypothesis test
based on the statistical significance is another method of expressing the confidence levels.
In the present case it has two machines machine one and machine two. The result shows that the two
machines could be compared to identify if the machines are viable. The z score used for identifying the
hypothesis in the two machines. The machine one is having z- score of -3.75 score that is below the
average mean. Machine 2 shows a z-score of -13 which shows it is below average mean
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