BBQfun Sales data worksheet - Assessment TASK 2 Part A PDF

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ASSESSMENT TASK 2 Student Name: Thim Lee Id: BsBsus501

BBQfun sales data worksheet

Performance Market share (projected*): Assume market share constant across all products.

Financial year (FY) FY 2013–14 FY 2014–15 FY 2015–13 * FY 2016–17 Sales performance:

Local independents 30% 30% 30% 30%

The Yard

BBQs R us

0% 0% 0% 0%

25% 27% 22% 22%

Outdoorz 23% 23% 25% 24%

BBQfun 22% 20% 23% 24%

Financial year (FY) Total sales FY 2013–14 8,500,000 FY 2014–15 10,000,000 FY 2015–13 9,000,000 FY 2015–16 9,500,000 Estimated total market potential for FY 2012–13 (SE Qld) Calculate potential sales for marketing opportunities. Total market potential (with potential online sales included) Use to calculate potential sales with e-commerce included in FY 2012–13.

Financial year (FY) FY 2012–13 FY 2013–14 FY 2014–15 FY 2015–13 FY 2016–17

BBQs 25,000 35,000 40,000 45,000 52,500

Outdoor Furniture 13,000 15,000 17,000 19,000 21,000

BBQ Accessories 42,000 58,000 68,000 75,000 88,000

Total 80,000 108,000 125,000 139,000 161,500

Own branded products Assume market share of 24% for BBQfun to calculate projected number of units to sell for each item in FY 2012–13.

Number of buyers

BBQs 30,000

Outdoor Furniture 13,000

BBQ Accessories 56,000

1

1

3

$600

$850

$50

Quantity Average price

With E-commerce( assume market share of 24% for BBQs)

BBQs: 52,000*24%=12,600 Outdoor Furniture: 21,000*24%=5,040 BBQ Accessories: 88,000*24%=21,120

Opportunities and profit figures for calculation E-commerce BBQs: 12,600*1=12,600 Outdoor Furniture: 5,040*1=5,040 BBQ Accessories: 21,120*3=63,360

Bargain Market BBQs: 13,000*1=13,000 Outdoor Furniture: 5,250*1=5,250 BBQ Accessories: 22,000*3=66,000

Bargain market Assume market share of 25% for BBQfun.

Number of buyers

BBQs 40,000

Outdoor Furniture 20,000

BBQ Accessories 70,000

1

1

3

$500

$650

$40

BBQs 32,258

Outdoor Furniture 14,773

BBQ Accessories 50,909

1

1

3

$620

$880

$55

Quantity Average price With E-commerce Assume market share of 24% for BBQfun.

Number of buyers Quantity Average price

Opportunities and profit figures for calculation

Sales volume (units)

Price

Unit contribution margin

Total revenue Total gross profit

Own brand BBQ: 7,200 Furniture: 3,120 Accessories:

E-commerce BBQ: 12,600 Furniture:5,040 Accessories:

Bargain market BBQ: 13,000 Furniture: 5,250 Accessories:

40,320 BBQ: $600 Furniture:$850 Accessories:$50 BBQ: $500 Furniture: $600 Accessories: $40 8,988,000

63,360 BBQ: $620 Furniture: $880 Accessories:$55 BBQ: $300 Furniture: $420 Accessories: $20 15,232,000

66,000 BBQ: $500 Furniture: $650 Accessories:$40 BBQ: $200 Furniture: $220 Accessories: $10 12,552,000

$7,164,000

$5,065,000

$7,084,800

FY 2016–17 Additional fixed costs

Add lease:

Add training:

See approved

$1,000,000

$50,000

budget (no change

Add labour:

Add online store

in fixed costs)

$500,000

development:

Add plant

$100,000

(depreciation):

Add new plant and

$500,000

equipment (depreciation): $150,000 Add labour: $250,000 Add reconfiguring

Own brand

Total net profit

$200,086

E-commerce of warehouse/ office: $50,000 $1,679,286

FY 2016–17

Total revenue= Sales* Price

Own brand= (7,200*600) + (3,120*850) + (40,320*50) = 4,320,000 + 2,652,000 + 2,016,000 = 8,988,000

E-Commerce= (12,600*620) + (5,040*880) + (63,360*55) =7,812,000 + 4,435,200 + 3,484,800 =15,232,000

Bargain Market= (13,000*500) + (5,250*650) + (66,000*40) = 6,500,000 + 3,412,500 + 2,640,000 = 12,552,000

Total gross profit FY2016-17= sales* unit contribution margin Own brand= (7,200*$500) + (3,120*$600) + (40,320*$40) = 3,600,000 + 1,872,000 + 1,612,800 = $7,084,800 E-Commerce= (12,600*$300) + (5,040*$420) + (63,360*$20) = 3,780,000 + 2,116,800 + 1,267,200

Bargain market

$180,286

=$7,164,000 Bargain market= (13,000*$250) + (5,250*$220) + (66,000*$10) = 3,250,000 + 1,155,000 + 660,000 = $5,065,000

Total net profit: Total gross profit – total fixed cost

Own brand: $7,084,800 - $6,884,714= $200,086 E-commerce: $7,164,000 - $5,484,714= $1,679,286 Bargain market: $5,065,000 - $4,884,714= $180,286

Profitability index figures for calculation

Cash flow 2016–17 Opportunity cost Present value of future

Own brand (Use gross profit) 8% $6,560,000

E-commerce (Use gross profit) 8% $6,633,333

Bargain market (Use gross profit) 8% $4,689,815

cash flows Present value of initial

(Use total fixed

(Use total fixed

(Use total fixed

costs)

costs)

costs)

investment Profitability index

0.95

1.2

0.96

Operational changes After consulting with the management team at BBQfun, you determine: ● high risk of customer service quality problems for online customers ● high risk of staff misunderstanding changes and considering online sales as threat to jobs ● eight online sales and customer service people will be needed to manage increased online customers

● since stores are overstaffed, need for online people could be met from drawing from existing employees at the two stores ● currently no staff have online customer service skills ● management would like to develop people through retraining rather than hire new staff to handle online sales ● six delivery trucks needed to enable distribution ● website will take 50 days to develop ● three forklifts needed ● four additional warehouse workers needed ● six additional drivers needed ● office space may need to be reconfigured.

Profitability index figure for calculation Present value of future cash flows: Own brand: $7,084,800/(100%+8%)=$6,560,000 E-commerce: $7,164,000/(100%+8%)=$6,633,333 Bargain market: $5,065,000/(100%+8%0=$4,689,815

Profitability index: Own brand: $6,560,000/$6,884,714=0.95 E-commerce: $6,633,333/$5,484,714=1.2 Bargain market: $4,689,815/$4,884,714=0.96

Available resources and costs Resources Additional staff

Plant and equipment depreciation

Costs Additional staff costs:$250,000

$25,000 year average

Plant and equipment costs:

● Delivery trucks

$150,000

($20,000 each) ● Forklifts ($10,000 each)

Promotional costs Website developers

$500,000 Contractors ($2,000/day)

Website development cost: $100,000

Staff training

Online customer service

Staff training cost:$24,000

training Management change

($3,000 per staff member) $3,000 each

Management and leadership training cost:$24,000

leadership training for store managers and team leaders Warehouse and office

Reconfiguration cost:$50,000

reconfiguration $1,101,000

Total

Available resources and costs Additional staff = 4 additional warehouse workers + 6 additional drivers needed = 10 additional staff = $25,000*10 =$250,000

Plant and equipment depreciation= 6 delivery trucks + 3 forklifts = ($20,000*6) + ($10,000*3) = $150,000

Website development= $2,000*50= $100,000 Staff training= $3,000*8= $24,000

Management change leadership training for store managers and team leaders: Brisbane: 1 store manager + 4 sales team leaders= 5 peoples Gold Coast: 1 store manager + 3 sales team leaders= 4 peoples Brisbane + Gold Coast= 9 peoples

Reconfiguration of warehouse and office= $ 50,000 Total: $250,000 + $150,000 + $500,000 + $100,000 + $24,000 + $27,000 + $50,000 = $1,101,000

PART B: REPORT Introduction BBQ fun was established in 2009 by current CEO, Pat Mifsud. BBQ fun offers an extensive product range, incorporating both local and imported goods. Since 2010, the increasingly competitive retail environment, technological change, changes in consumer buying patterns and consumer confidence has led to disappointing sales. However, BBQ fun intends to return to healthy sales of $11 million in 2012 through building on its organizational strengths, through targeted marketing strategies aimed at key segments and through exploiting marketing opportunities. Currently, BBQ fun operates two stores, one in Brisbane (Kenmore), and one on the Cold Coast. BBQ fun is seeking business and marketing opportunities that could lead to interstate or national expansion if viable and scalable.

Three marketing opportunities analysis In BBQ fun, our teams have identified three marketing opportunities to evaluate:

• Manufacture and sell own brand

This opportunity is to manufacture and retail own-branded barbecues and products. Manufacture would take place at a leased plant in India as BBQ fun has no manufacturing capability. Also, manufacture in Australia would be too expensive.

• Sell product through-commerce

This opportunity is to offer all products in an online store. Stock could be stored at no extra cost at existing stores. Customers would cover the delivery cost.

• Sell products at bargain prices

This option is to aim to increase market share by cutting the cost of products and aiming at mass appeal.

Marketing plan

Marketing Mix

Structure

Own

According to the customer

The expenses might

BBQ fun emphasis

brand

survey data, 80% of new

decrease since the

value over price and

builds believe Australian

manufacture is

back this up with a

made is important, 65% of

outsourced in India.

three years guarantee.

surveyed renovators and 55% of replacements would like to buy Australia made products.

E-commerce

-BBQ fun’s competitors are

-According to customer

-Easy to establish

considering e-commerce

survey data, all surveyed

online store since their

option

customers would like to

stock could be stored

buy online and also

at no extra cost at

- customers might not

willing to pay for online

existing stores. And

experience high quality

delivery if chosen.

indoor customer service

Customer would cover the deliver cost.

- E-commerce could help BBQ fun target their market everywhere they want.

-Social media is considered not viable or practical considering low participation among targeted segments.

Bargain

The customer needs all

Replacements think

BBQfun will position

market

products/services to be

price in more important

itself as a broad

competitively proceeding

compare to services.

assortment, quality,

relative to comparable high-

and unique outdoor

end outdoor lifestyle

lifestyle retailer.

options offered by competitors.

Evaluation of each opportunity in term of impact to current business and customer base.

According to the calculation in Part A, it is clear that the total market potential for upcoming financial year (FY 2016-17) is 161,500, including 52,500 BBQs, 21,000 outdoor furniture and 88,000 BBQ accessories. As discussed in Part A, in opportunities and profit figures for calculation section, we can easily find out that E-commerce could help BBQ fun to gain the highest sales volume, the estimated volume would be 12,600 units for BBQs 5,040 units for Furniture and 63,360 unites for accessories,

followed by the sales volume of the use of bargain market, including 13,000 BBQs, 5,250 furniture and 56,000 accessories. The number of products that sold through own brand has occupied the smallest proportion, they have 7,200 BBQs, 3,120 units for furniture and 40,320 for the sales volume of accessories. When compare those three opportunities in terms of sales volume, we found that the sales volume is significantly high when we adopt E-commerce which allows customer from all around the Australia even other parts of the world to access and learn about BBQ, it is better to build brand recognition and develop potential customers. When comparing the total gross profit of those three approaches for the financial year 2016-17, we can see that the total gross profit for Own brand is $7,084,800, $7,164,00 for E-commerce and $5,065,000 for bargain market. As the unit contribution margin of BBQ, Furniture and Accessories of E-commerce is much lower than that of Own brand, it results in less difference between total gross profits of those two approaches. When comparing the total net profit of these approaches might bring, we could see that E-commerce has the highest profit which is $1,679,286 followed by the net profit of Own brand $200,086 and $180,286 for Bargain market. Base on the aspect of profitability, Ecommerce is the best opportunity for BBQ fun to attract more customers and generate more revenue. All the calculations ate base on the assumption that Own branded product take 24% market share for BBQ fun, Bargain market is assumed market share of 25% for BBQ fun, and E-commerce takes 24% for BBQ fun. Therefore, the bargain market has greatest number of buyers (130,000) followed by own brand products, which has 99,000 buyers, and E-commerce would gain the smallest number of buyers, which is 97,940. However, E-commerce has the most sales volume and relatively low fixed cost, therefore, it could generate most net profit for BBQ fun.

Policies and procedures



Privacy Act 1988 (Commonwealth) All marketing material and sales activity for those three opportunities must adhere to the Privacy Act, they must not use personal images, information for marketing purposes without express written consent. BBQ fun would collect customer’s personal information, according to the law, BBQ fun is not allowed to leak any information about their customer or use for other purpose.



Anti-Discrimination Act 1991 (Queensland)

Images or written material must not portray any group or individual in negative, offensive or stereotypical way on the basis of sex, gender, marital status, etc. This legislation could be applied all three approaches. This policy is relevant to Own branded products, since the manufacture of BBQfun would be outsourced by Indian people, we have to ensure transaction with clients, tenants and other employees is handled family and transparently and in accordance with organization and legal requirement.



All the strategies and sales activities must be conducted in a safe and responsible manner to minimize risk to health and safety of BBQ fun employees and the general public.



Spam Act 2003(Commonwealth) All sales activities and campaigns must not include spam campaigns

Strategies or approaches to mitigate risk

Own Brand

Major Costs

Benefits

Risks

Approaches

Add lease:

Since the

Bad communication

Improve the

$1,000,000

manufacture

with offshore team

quality of

Add labor:

would take place at a

and result in poor

communication

$500,000

leased plant in India,

quality product and

with offshore

Add plant:

it helps to save cost

reduce sales indirectly.

team in India

$500,000

of

Internet and system

Use the most

each product, therefore the unit contribution margin for own branded product is high. E-commerce

Add online

Increase

store

traffic online

break down

company

development: $100,000 Add new

reliable internet

make BBQfun more available and accessible

backup online

plant

documents or

and

any data on the

equipment:

regular basis

$150,000 Add labor: $250,000 Add configuring of warehouse: $50,000 Bargain

Decreased in

Attract more

Market

price of each

customer with

products

compelling price

Low profit

Set the price base on the fixed

Bad impression because

cost

normally people would like to believe expensive product would have good quality, cheap stuffs would not

Based on your calculation, rank the three marketing opportunities.

Base on the calculation we can see that E-commerce has the highest return on investment and profitability index. Therefore, based on the financial perspective, E- commerce is the best option for BBQ fun, followed by Own brand, since the bargain market has lowest return on investment and profitability, it would be the least option for BBQ fun to consider. Changes to current operations in order to take advantage of the opportunity 1. For the top-ranked option – E-commerce, which is assumed market share of 24% for BBQ fun, the sales volume will be high including 12,600 unite of BBQ, 5,040 units of Furniture and 63,360 of

Accessories. So make sure that the stock should be sufficient for customer, the product should be shipped out as soon as the customer place their order.

2. BBQ fun should hire a professional IT team to develop and maintain the online store, in order to make the online transaction safe and smooth.

3. Need to train the staffs to online store and teach them how to update product information on the website, they also need to learn how to help customer to modify their order or cancel their order and help customer to solve their question.

4. BBQ fun will be needing a reconfiguring of office where place staff that dealing with customer from online store.

5. Staff should be trained how to communicate with customer online properly.

6. BBQ need to put more budget for advertising for their new approach, and purchase relevant equipment, such as computers, printers etc.

Strategies or approaches to mitigate ris All the strategies and sales activities must be conducted in a safe and responsibl...