Comment on the feasibility of the profit target in the current environment. You are expected to analyse and discuss cost and revenue projections

  
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MN5070QA – The Practice of Consultancy 

The coursework consists of two parts. All tasks in both parts need to be attempted.
Note that Dusty Knuckle and Local Supermarket are fictitious clients. The ODUNTOL scenario is fictitious.

NOTE: Kindly share your UPDATED exam paper to the LIVE EXPERT with an updated Case Study (if any)

Task 1: Dusty Knuckle [30 marks]
The client is the CEO of Dusty Knuckle (DK), a bakery and café located in London’s Dalston and Harringey neighborhoods. The Dusty Knuckle is one of London`s leading sourdough bakeries, providing freshly baked bread and pastries to some of the city`s best restaurants, cafes, and shops. Earlier, you had worked on optimising the firm’s cost structure. Your final recommendations related to this consultation were presented to the client in January 2022. The CEO DK has now asked you to help further improve the firm’s profitability.

Additional Information: Customers

  • DK has 2 types of customers: dinners and wholesale consumers.
  • Whilst DK’s dinner consumers are typically not very price sensitive, they are keener on luxury experiences.
  • Increasing numbers of consumers are seeking to consume the    dining experience (pizza and wine) in the cafe
  • The typical DK customer is a 25 to 45-year-old professional, with an annual household income above £45,000.
  • On average, customers spend £20 per transaction, with an average price for pizzas at £10

Company
  • DK bakes high quality dough and has excellent reviews.
  • DK’s distribution channel: Dalston site is the original home and HQ of The Dusty Knuckle (Bakery); Harringey, Green Lanes site (Bakery and dining)
  • Previously the client also sold pastries online. This channel was closed following a cost structure optimisation consultation in 2018, as its cost-to-revenue ratio was unsustainable. DK still maintains a website, where customers can pre- order pasteries for store pickup but delivery to private customers is not currently offered.
  • DK has a cost-efficient operating structure, with fixed and variable costs coming in below industry benchmarks. The Cost Revenue Ratio is 1:5 or 20% i.e. every £20 spent generates £100 in revenue.
  • DK’s total annual revenue (net sales) for the year ending 31 December 2022 is £3,239,800.
  • Revenue breakdown: Dalston bakery contributed £2,721,500; restaurant sales added £518,300.
  • Average transaction values for Dalston bakery outlet and Harringey, Green Lanes site (Bakery and dinning) are £38 and £80 respectively.
  • Return on Sales (margin) is 61% for the Dalston bakery outlet and 56% for Harringay, Green Lanes site (Bakery and dining) Combined RoS: 60.2%.
  • DK’s target gross profit for the next financial year is £2,400,000.

Industry and Competition
  • The industry growth rate is in line with the UK GDP growth rate.
  • The market is intense, with the top 5 artificer bakeries controlling 78% of the luxury bread market.
  • DK holds 42% of the freshly baked pastry market (North London).
  • Its main rival has 28% market share. The third and fourth largest rivals hold 7% and 2% respectively. In addition, there are several small local bakeries serving the exclusive segment in different regions.
  • The foremost competitor has four distribution channels.
  • Data on the main competitor’s profitability is not available.


NB:
You may assume that DK is not immune to the impact of increases in inflation (e.g. higher energy and commodity prices) and lower economic growth caused by crises, such as the pandemic or BREXIT (growth rate: 0.1%, inflation: 6.2%)

Required (Comments for task 1 should not exceed 800 words in total.)

  1. To understand the underlying dynamics, use a relevant strategic framework, such as the 3Cs or Porter’s Five Forces, to inspect the problem and analyse the situation.
  2. Estimate the DK’s gross profit for the financial year ending 31 December 2022 and present recommendations aimed at improving profitability.
  3. Comment on the feasibility of the profit target in the current environment. You are expected to analyse and discuss cost and revenue projections, as well as the impact of current political-legal, economic, social, technological and environmental factors on profit, if considered relevant*.
  4. Present your analysis (for points 1 to 3 above), deliverables and recommendations in a 600 to 800-word report addressed to the CEO of Dusty Knuckle in a report addressed to the CEO of DK. Your report should follow a clear structure and contain an introduction and conclusion with recommendations.

NB: Work for points (1) to (3) is completed ‘behind the scenes. The resultant framework, analyses, calculations, and recommendations should be presented to the client in the report and / or in the appendix of the report.

Task 2 : Oduntol F&D Market Entry [ 30 marks]
You are a business analyst consulting for Oduntol, a UK retail company. It had invested in food and drink retailing but presently plans to enter into the packaged food manufacturing market. Oduntol has asked you and your team of analysts to determine the viability of the market.

Required for Task 2 (Comments for task 2 should not exceed 800 words in total.)
Prepare a short 600 to 800-word report for Oduntol UK Limited, addressing the points/questions below. Your report should follow a clear structure and contain an introduction and conclusion with recommendations.
(a) At the first meeting, the client seemed concerned about how you plan to approach the viability and market entry questions. Provide a brief overview of the market entry framework/approach you will focus on to analyse the decision problem.
(b) Based on the proposed approach, how would you go about conducting the analysis and gathering the data and information required? Including the key sources of information and insights, you intend to consult.
(c) Do a situational analysis to identify opportunities and challenges, both internal and external, to the organisation. You can also use the analysis to define the scope of the problem.

N.B: The words contained in the framework are not part of the word limit.

(d) UK food and drink manufacturing market is on the rise, being worth £120 billion in total revenue as of 2021 indicating an increase from £110 bn in 2020. In 2025 revenue for the sector is projected to reach £250bn
You and your team of consultants should consider the following points:

  1. Calculate the projected percentage market growth rate (revenue) between 2020 and 2021 and provide an estimate of the projected growth rate between 2021 and 2025
  2. Given the market was estimated to be worth £125 bn in 2022, £170bn in 2023 and £190bn in 2024. Calculate the expected annual growth rate (CAGR (2021 – 2025) between 2021 and 2025

(e) Oduntol’s revenue was £500,000 in 2022. Following its investment in the food and drink manufacturing market, the firm has set a revenue target of £1000,000 by 2025. By what percentage should revenue grow each year to reach the target?


Task 1: Statistical Consulting [30 Marks]
A local supermarket in Tingley introduced a loyalty card app in January 2022. Customers buy groceries using the loyalty card app on their mobile phones. As a consultant to the local supermarket, you have been asked to conduct a study to examine the frequency of repeat purchases by customers. Specifically, you have been asked to assess whether there is a disparity in repeat purchases between consumers who use the loyalty card app and those who are not.

The following research questions were set.

The following two sets of hypotheses were stated.
1. Is the proportion of consumers who use the loyalty card app greater than 50%?
2. Is the proportion of consumers who make repeat purchases different between those who use the loyalty app and those who do not?

The following two sets of hypotheses were stated.
1. Is the proportion of consumers who use the loyalty card app greater than 50%?
2. Is the proportion of consumers who make repeat purchases different between those who use the loyalty app and those who do not?

The following two sets of hypotheses were stated.
Null: The proportion of consumers who use the loyalty app is equal to 50%.
Alternative: The proportion of consumers who use the loyalty app is greater than 50%.

Null: The proportion of consumers who make repeat purchases is not different between those who use the loyalty app and those who do not.
Alternative: The proportion of consumers who make repeat purchases is different between those who those who use the loyalty app and those who do not.

A simple random survey was conducted among traditional supermarket shoppers. Two of the questions, taken from the research instrument, are reproduced below.
Question 1: Do you make repeat purchases?           0. No Ο        1. Yes Ο
Question 2: Do you use the loyalty app?                 0. No Ο        1. Yes Ο

Appendix – SPSS Output for Part 2
Required for Part 2 ( comments for Part 2 should not exceed 400 words in total)
To complete the following, you need to refer to the output in the Appendix below. The SPSS tables should be inserted into your report and used as statistical evidence. Use either a snipping tool to copy the tables in the appendix or copy the tables (saved as PNG images) from the file: SPSS Evidence in the coursework folder.
The tables are made available but a data set is NOT made available for Part 2.

Tables can be found in the Appendix.
Interpret Table 2.1 and prepare a short comment on your findings.
(B) Table 2.2 shows the output for a hypothesis test conducted to inform on research question 1 above. Interpret the output and prepare a short statistical report, in the classical style, to summarise your findings. In your report, you need to state the null and alternative hypotheses, name the hypothesis test conducted and fully explain the output (all relevant values), calculate and interpret the effect size, where relevant, and discuss the assumptions of the test.
Based on your statistical interpretation, write a second comment aimed at the client to explain the outcome of the research in plain English.
(C) Table 2.3 shows the output for a hypothesis test conducted to inform on research question 2 above. Interpret the output and prepare a short statistical report, in the classical style, to summarise your findings. In your report, you need to state the null and alternative hypotheses, name the hypothesis test conducted and fully explain the output (all relevant values), calculate and interpret the effect size, where relevant, and discuss the assumptions.
Based on your statistical interpretation, write a second comment aimed at the client to explain the outcome of the research in plain English.


NB: Up to 10% of the marks is awarded for coursework management. Marks are awarded for professional presentation, use of section and paragraph titles and starting each task on a new page, among others.

Appendix – SPSS Output for Part 2
Table 2.1 

The Proportion using the Loyalty App
  Frequency Percent Valid Percent
Valid No 300 61.0 61.0
  Yes 188 39.0 39.0
Total 488 100.0 100.0


Table
2.2 

Binomial Test

 

Category

N

Observed Prop.

Test Prop.

Exact Sig. (2- tailed)

The proportion using Loyalty App

No

300

0.79

0.50

0.002

Yes

188

0.21

 

 

Total

488

1.00

 

 


Table
2.3 

Chi-Square Tests

 

        Value                     df               Asymptotic Significance (2-sided)

Pearson Chi-Square

59.809a

1

< 0.002

N of Valid Cases

488

 

 

a. 0 cells (0%) have expected count less than 5. The minimum expected count is 7.94.

Symmetric Measures 

 

 

Value

Approximate Significance

Nominal by Nominal

Phi

.525

<.002

 

Cramer`s V

.325

<.002

N of Valid Cases

 

488

 


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