Bsbmkg 501 Identify and evaluate marketing opportunities PDF

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Bsbmkg 501 Identify and evaluate marketing opportunities assessment 1...

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BSBMKG501 Assessment 2:

Part A Estimated total market potential for FY 2013-14 (SE Old) Calculate potential sales for marketing opportunities.

Total market potential (with potential online sales included) To calculate sales for BBQs for FY2016-17 Year

Sales (y) in units Coded time (x) xy

x^2

2012-13

25,000.00

1

25,000.00

1

2013-14

35,000.00

2

70,000.00

4

2014-15

40,000.00

3

120,000.00 9

2015-16

45,000.00

4

180,000.00 16

Total E

145,000.00

10.00

395,000.00 30.00

Mean, (Ẏ),(Ẋ) 36,250.00

2.5

y=a + bx

b=Exy - nẊẎ/ Ex^2 - n(Ẋ)^2 a= Ẏ - bẊ 6500

20000

y = 20000 + 6500x Substitute x as 5 to find sales for BBQs for FY2016-17

52,500.00

To calculate sales for Outdoor furniture for FY2016-17 Year

Sales (y) in units Coded time (x)

xy

x^2

2012-13

13,000.00

13,000.00

1

1

2013-14

15,000.00

2

30,000.00

4

2014-15

17,000.00

3

51,000.00

9

2015-16

19,000.00

4

76,000.00

16

64,000.00

10.00

170,000.00 30.00

Mean, (Ẏ),(Ẋ) 16,000.00

2.5

y=a + bx

b=Exy - nẊẎ/ Ex^2 - n(Ẋ)^2 a= Ẏ - bẊ 2000

11000

y = 11000 + 2000x Substitute x as 5 to find sales for BBQs for FY2016-17

21,000.00

To calculate sales for BBQ Accessories for FY2016-17 Year

Sales (y) in units Coded time (x)

xy

x^2

2012-13

42,000.00

1

42,000.00

1

2013-14

58,000.00

2

116,000.00 4

2014-15

68,000.00

3

204,000.00 9

2015-16

75,000.00

4

300,000.00 16

Total E

243,000.00

10.00

662,000.00 30.00

Mean, (Ẏ),(Ẋ) 60,750.00

2.5

y=a + bx

b=Exy - nẊẎ/ Ex^2 - n(Ẋ)^2 a= Ẏ - bẊ 10900

33500

y = 20000 + 6500x Substitute x as 5 to find sales for BBQs for FY2016-17

88,000.00

To calculate sales for total for FY2016-17 Year

Sales (y) in units Coded time (x) xy

x^2

2012-13

80,000.00

1

80,000.00

1

2013-14

108,000.00

2

216,000.00

4

2014-15

125,000.00

3

375,000.00

9

2015-16

139,000.00

4

556,000.00

16

Total E

452,000.00

10.00

1,227,000.00 30.00

Mean, (Ẏ),(Ẋ) 113,000.00

2.5

y=a + bx

b=Exy - nẊẎ/ Ex^2 - n(Ẋ)^2 a= Ẏ - bẊ 19400

y = 20000 + 6500x Substitute x as 5 to find sales for BBQs for FY2016-17

161,500.00

With E-commerce (Assume market share of 24% for BBQfun) BBQs: 52,500*24%=12,600 Outdoor Furniture: 21,000*24%=5,040 BBQ Accessories: 88,000*24%=21,120

Opportunities and profit figures for calculation

64500

E-commerce BBQ: 12,600*1=12,600 Outdoor Furniture: 5,040*1-5,040 BBQ Accessories: 21,120*3=63,360

Bargain market BBQ: 10,000*1=10,000 Outdoor Furniture: 5,000*1=50,000 BBQ Accessories: 17,500*3=52,500

Total revenue=Sales*Price Own brand=7200*600+3120*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=

10,000*500+5,000*650+52,500*40=5,000,000+3,250,000+2,100,000=10,350,000

Total gross profit FY2016-17=Sales*unit contribution margin =7,200*$500+3,120*$600+40,320*$40=3,600,000+1,872,000+1,612,800=$7,084,80 0(own brand) By using the same approach: Ecommerce: $7,164,000 Bargain market: $3,625,000

Total net profit=Total gross profit-total fixed costs Own brand: $7,084,800-$6,884,714=$200,086 E-commerce: $7,164,000-$5,484,714=$1,679,286 Bargain market: $3,625-$4884,714=-$1,259,714

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: $3,625,000/(100%+8%0=$3,356,481

Profitability index: Own brand: $6,560,000/$6,884,714=0.95 E-commerce: $6,633,333/$5,484,714=1.2 Bargain market: $3,356,481/$4,884,714=0.69

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: $3000*8=$24,000

Management change leadership training for store managers and team leaders: Brisbane: 1 store manager+4 sales team leaders=5 people Gold Coast: 1 store manager+3 sales team leaders=4 people 5 people+4 people=9 people $3,000*9=$24,000

Configuration cost: From page8/9 -- Add reconfiguration of warehouse and office=$50,000

Total: $50,000=$1,101,000

$250,000+$150,000+$500,000+$100,000+$24,000+$27,000+

PART B:

Executive summary An in-depth analysis has been made of the three marketing opportunities and operational changes for the top-ranked opportunities, for both financial perspective and non-financial perspective. The benefits and potential threat will be discussed in the report and give the possible mitigation strategies. At end of the report, the topranked opportunities will be selected, relevant changes for operation and the estimated cost of the changes will be list in the 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 team 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 builds

believe

since

the value over price and

Australian manufacture

is back this up with a

made is important, 65% of outsourced in India.

three

surveyed renovators and 55%

guarantee.

years

of replacements would like to buy Australia made products.

E-

- BBQ fun’s competitors are -

commerce considering

to -Easy to establish

According

e-commerce customer survey data, online store since all surveyed customers their stock could be

option

would like to buy stored at no extra -

customers

experience

might high

not online and also willing cost

quality to

indoor customer service

pay

for

at

online stores.

delivery if chosen

customer

existing And would

- E-commerce could cover the delivery help BBQ fun target cost. their

market

everywhere they want, not only in South east

Brisbane. -Social

media

is

considered not viable or pratical considering low

participation

among

targeted

segments. Bargain

The

customer

needs

all - Replacements think BBQ

market

products/services

to

competitively

proceed important compare to broad

be price

in

fun

will

more position itself as a assortment,

relative to comparable high- services.

quality, and unique

end outdoor lifestyle options

outdoor

offered by competitors.

retailer.

lifestyle

Evaluation of each opportunity in terms 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 BBQ, 5,040 units for Furniture and 63,360 unites for Accessories, followed by the sales volume of the use of Bargain market, including 10,000 BBQ, 5,000 Furniture and 52,500 Accessories. The number of products that sold through Own brand has occupied the smallest proportion, they have 7,200 BBQ, 3,120 units for Furniture an d40,320 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 allow 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 $3,625,000 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 profit 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. Bargain market has negative profit which is $1,259,714. Base on the aspect of profitability, E-commerce 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 branded products, which has 99,000 buyers, and E-commerce would gain the smallest number of buyers, which is 38,760. However, E-commerce has the most sales volume and relatively low fixed cost, therefore, it could generate most net profit for BBQ fun.

Assess external factors that may be relevant to each opportunity. In Chapter 9 in the material, there are information about sales and marketing policy and procedure which is required to enable BBQ fun to adhere to all legislation relevant to marketing practices and meet standards and codes such as Advertising Standards Bureau (ASB) codes of conduct. Those relevant legislations are: ➢ 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 s 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 BBQ fun 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. It is unlawful to discriminate on the basis of sex, race, religious belief etc. so it is unappropriated for customer believe that only product made in Australia are good. ➢ 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. 

Competition and Consumer Act 2010 (Commonwealth) Employees must not attempt to induce individuals to place their personal interests above those of BBQ fun; employees can not violate any law or regulation



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



Australian Direct Marketing Association (ADMA) Direct Marketing Code of Practice



Free TV Australia Commercial Television Industry Code of Practice



Australian e-Marketing Code of practice & Australian e-commerce best practice model. E-commerce must have obliged by these two legislations.

Strategies or approaches to mitigate risk Major cost

Benefit

Own brand Add lease:

Risks

strategies bad -

the -

Since manufacture

Add labor:

would

$500,000

place

Add plant:

leased plant in quality product

$500,000

India, it helps

of

take with offshore team communication a and result in poor with

at

offshore

team in India

to save cost of - offshore team give - Add each

the

quality

communication

$1,000,000

improve

product issue

product, your

the

information

competitors

unit

in

to contract to avoid

the information

therefore

privacy

leaking

contribution margin for Own branded product is high. E-commerce Add online store -

increase -

development:

traffic online

$100,000

- make BBQ

Add new plant fun

break - Use the most reliable

down

nature

disaster

and causes information - backup online documents on the

lost

$150,000

accessible

Add labor:

- target market

$250,000

could

regular basis

way -

Add configuring beyond of warehouse:

southeast

$50,000

Brisbane

Bargain

Decreased

market

price

of

products

internet

company

more -

and equipment: available

internet

prepare

contingency plan

in - attract more -negative profit

- set the price

each customer with - bad impression base on the fixed compelling

because

normally cost

price.

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

Return on investment: Own brand: $200,086/$6,884.714*100%=2.91% E-commerce: $1,679,286/$5,484,714*100%=30.61% Bargain market: -$1,259,714/$4,884,714*100%=-25.79%

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: $3,625,000/(100%+8%0=$3,356,481

Profitability index: Own brand: $6,560,000/$6,884,714=0.95 E-commerce: $6,633,333/$5,484,714=1.2 Bargain market: $3,356,481/$4,884,714=0.69

Base on your analysis so far, 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, Ecommerce is the best option for BBQ fun, followed by Own brand, since the bargain market has negative 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 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. 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.

Estimate and justify resource requirement and cost for changed operations: 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: $3000*8=$24,000

Management change leadership training for store manag...