just part of Decision Support Tool for Marketing Management need SWOT Analysis

FREEMAN BREWERY BAR

Team 5: Wei Li, Ting Pan, Jichang Cai, Xinyi Feng, Tianyi Tong

AD715: Quantitative and Qualitative Decision-Making

Dr. Vladimir Zlatev

May 4, 2018

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Table Of Content

Executive Summary 3

1. Introduction 4

1.1 Problem Statement 4

1.2 Overall Goals and Objectives of the Report 4

2. Managerial Decision-Making Process for Selected Functional Areas 5

2.1 Marketing Management and Decision Making 5

2.2 Innovation Management and Decision Making 6

2.3 Operations Management and Decision Making 6

2.4 Financial Management and Decision Making 8

2.5 Organizational and HR Management and Decision-making 9

3. Application of Decision Support Tools 11

3.1 Decision Support Tool for Marketing Management 11

3.2 Decision Support Tool for Innovation Management 12

3.3 Decision Support Tool for Operations Management 12

3.4 Decision Support Tool for Financial Management 14

3.5 Decision Support Tool for Organizational and HR Management 15

4. Evaluation of the Result of the Business Simulation 18

4.1 Comparison Based on Marketing Management 18

4.2 Comparison Based on Innovation Management 19

4.3 Comparison Based on Operations Management 19

4.4 Comparison Based on Financial Management 19

4.5 Comparison Based on Organizational and HR Management 20

5. Summary of the Results, Recommendations, and Conclusions 21

5.1 Summary of Results 21

5.2 Recommendations 21

5.3 Implementation Plan for the Selected Strategy 22

5.4 Conclusions 24

6. Appendixes 24

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Executive Summary

2018 has began itself up as a year of great dining experiences especially in Chinatown. However,

the shortage of restaurants has given us an opportunity to establish a viable project. The region is

currently occupied by locals and incoming tourists who provide a ready market for the Boston

cuisine and alcoholic drinks. Prior to the establishment of this project plan, we carried out an

extensive market analysis to determine the opportunities available and the expected competition. In

our findings, a well-established restaurant will only face one competitor - JM Curley Food &

Brews. The driving force behind our plan is the delivery of excellent restaurant experiences in the

area, with the aim of building a good reputation to edge out the competition that this project will

face once it is up and running. Some of the strategies that we have out in place to ensure that our

services stand out include professional management of the restaurant, deployment of a customer-

oriented approach, incorporation of innovativeness in service delivery and the adoption of new

technology to enhance customer satisfaction.

Beginning with a maximum capacity of 20 tables, we expect to serve at least 90 people at any given

instance. We have a vision of turning this restaurant into a benchmark when it comes to the

provision of alcoholic beverages and foods in Boston. One of our first goals is to earn the

customers’ trust in order to build brand loyalty and this will only be achieved if we manage to put

the clients first.

Our findings indicated that we would penetrate the market fully within three financial years,

increasing our capital investment by 15%, provided that we start the restaurant on a good note. Part

of our marketing plan involves rolling out a publicity campaign that we will use to sensitize locals,

especially the Boston University students regarding the special services that we offer and the little

perks that make our restaurant the best in the region. If the profit margins play within the postulated

range, we will possibly open a branch within the first three years of operation so as to dominate the

entire Boston region. ! /!3 42

1. Introduction

1.1 Problem Statement

Location of the Restaurant: Chinatown of Boston, near the green-line and orange-line subway.

Customers: Locals, Students, and tour visitors. 


Local Competitor: JM Curley food & brews 


Size of the Restaurant:

Maximum capacity= 20 tables x customers per table + bar area = (20 x 4) + 10 = 90 maximum

capacity per visit

Number of Customers:

Maximum 90 customers/visit x 6 turnarounds/days = max. 540 customers/day o actual visitors

(based on 70% occupancy rate/year) = [(max. 540 x 0.7) x 320)] = 378 customers/days x 320 days/

year = 120,960 annually per 2018

Number of Pints Served:

Number of customers x average pints per customer = 120,960 x 1.70 pints/customer = 205,632

units/2018 (note: results from market research: average 1.70 pints per customer)

Overall Increase of the Penetrated Market (without new products) for the Next 3 Years:

1.2 Overall Goals and Objectives of the Report

We named our restaurant as Brewery Bar & Grill and it will be located in Chinatown. As for the

size, we will begin with a maximum capacity of 20 tables, and we expect to serve at least 80 people ! /!4 42

FY0 FY1 FY2 FY3 FYI+FY2+FY3

YEAR 2018 2019 2020 2021

TOTAL FORECASTINCREASE OF PENETRATED

MARKET 100% 105% 110% 115%

NUMBER OF PINTS SERVED 205,632 215,914 226,195 236,477 678,586

at any given instance. Our goal is to turn this restaurant into a benchmark in alcoholic beverages

and foods service provision in Boston. We will invest $1,040,000 for the brewery space, including

rent, product costs, labor costs, advertising. Our objective is penetrating the market fully within

three financial years, increasing our capital investment by 15%. If the profit margins play within the

postulated range, we will possibly open a branch within the first three years of operation. We are

aiming to make $400,000 of net profit without taxes within the first three years and planning to

reach break-even point within 3 months.

Vision: The business’s vision is to be the benchmark in alcoholic substances service provision in

Chinatown. 


Mission: The business’s mission is to provide effective alcoholic substances products and affiliated

services to all clients in Chinatown. 


The business’s goals and objectives will be guided by the vision and mission. They are as listed

below as:

1. to earn trust, respect, and loyalty of our clients

2. to put the client’s best interest first and that our work should always provide 


value.

3. to hold ourselves accountable to the highest standards by meeting our client’s 


needs.

4. to recognize the value of sustainable business practices that will work to attain 


the Vision and Mission of the restaurant. 


2. Managerial Decision-Making Process for Selected Functional Areas

2.1 Marketing Management and Decision Making

Marketing management is the process of developing strategies and planning for product or services,

advertising, promotions, sales to reach desired customer segment. According to the estimation of ! /!5 42

production costs per products, we assume that the cost of material is $0.38, the cost of labor is

$0.20, and the cost of others is $0.26. From our research, the price of beer is a little lower than most

other places in Chinatown, depends on the exact kind of beer. Therefore, we chose to stock different

kind of beers in different time of the year. The seasonal styles suit the mood and temperament in a

lovely symbiotic link.

2.2 Innovation Management and Decision Making

At the beginning of the project, we assume that our variable cost in material is $0.28 for BR01-01,

BR01-02, BR01-07, and BR01-08, $0.25 for the rest of beer. The assumption in labor cost for each

beer is $0.1, and the other variable cost is $0.15. The reasons why we have to do the product or

technology Innovation management is that we have to increase the quality of product and price

decrease the costs.

There are three levels in Innovation we can try to improve, the process part, technology part and

product section. Since we are going to purchase a big amount of material from our suppliers, we

seek to find the suppliers, which may offer a better price. After implementing the process

innovation, the variable costs in material for the production of all products can be reduced by 1

cent. However, we didn’t increase or decrease the cost in labors and other costs.

Among the sections of innovation, in the cycle we chose to innovate the product. We added a new

item BR01-10 which is called Boston Best and assuming the beginning retail price is $5.00, since

we did a survey that the beer price in Chinatown is lower than other place, moreover draft beer is

normally more expensive than other canned beer. The variable cost of material, labor and others we

assumed that it maintains same as the previous beers. The cutoff point is 0.8, which means that

when we sell 80% of tank we make profit.

2.3 Operations Management and Decision Making

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Operation management is basically dealing with any event related to the creation of products and

services. Through studying internal and external factors, which are related to these criteria, we can

run our business more effectively and become more productive. After the efforts made by marketing

and innovation departments, we can look at the performance of our new business in operation

management. There are two main goals we wish to achieve when dealing with operation

management. The first goal is to determine an optimal fixed cost, which would meet out capital

limitation and to produce certain amount of products, which can meet customers’ demand

sufficiently. After we made some changes in our new business, such as delete items with poor

performance and add our own new product, each product now has certain sale volume and is able to

have a certain group of customers. Our net profit (after tax) has reached 838,817 after we made

those changes on our products (see OPT1). In order to achieve profit maximization and also meet

customers’ demands, we need to make adjustments on our operation management. We expect the

target market size of each product will not change a lot in the next three year. The market would be

relatively stable and we need to make adjustments on variable costs to make our products more

competitive. We had a long- term relationship with our supplier, so the raw material price would be

in a reasonable range. We slightly increased the price of labor and other factors, such as technology,

to increase the competitiveness of our products.

Based on our demand for each product, there are two ways to achieve our goal to increase

profitability and reduce unnecessary waste of time and money. One is to adjust variable cost on

products that have better sales performance to reduce their cutoff point, in this way they can be

more productive and we can further optimize their costs. Another one is to decrease cutoff point on

items which have poor sales performance, in this way they can be more profitable and we can

further work on marketing these products. For a startup company, to invest money only on best

sellers seems to be a risky move. As a result, we decide to start with making changes on products,

which still have room for improvement. We looked at the sales data generated from previous cycle;

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we discovered that BR01-03 to BR01-06 and BR01-10 has relatively low sales volume. As a result,

we decrease the cutoff point of BR01-03 to BR01-06, and BR01-10 from 0.80 to 0.60(Appendix

OPT3).

2.4 Financial Management and Decision Making

For financial management decision-making process, our group follows the process of basic

decision-making that has five steps below. 


Step 1: Recognize the Need for a Decision 


For this step, we have already recognized the needs for making the financial management decisions

for our new bar. Because it enables us to get a better understand of different financial aspects of our

bar and to decide materials, supplies, employees and other important things we need to prepare for

our bar’s operation and management. As a result, we can analyze the effects of different operating

procedures on projected profits and financial ratios on the basis of alternative versions of the

operating plan. 


Step 2: Generate Alternative 


Based on brewery industry facts and operation experiences from other bars, we decide to determine

what information is relevant to our financial aspects. We set a range of options to choose. For

example, we set alternatives for employee aspect. For more efficient operation, we need to have

office assistants, salesmen, executive salaries, and consultants. We also conduct the financial

opportunity analysis to find alternatives for our products price, fixed costs structure, profit before

taxed and free cash flows. In the end, we determine the amount of capital that will be needed to

support the plan and to achieve the target sales will cost. 


Step 3: Assess Alternative 


To choose best alternatives, our group evaluates their feasibility, acceptability, and desirability. We

focus more on their importance and correlation with our basic operation. We assess different

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alternatives to our insurance, depreciation, growth rate, required loan amount and other factors. And

identify sources of them and market conditions in financial markets to determine whether we should

require external capital. 


Step 4: Choose Among Alternatives

After assessing all alternatives, we decide to have seven aspects of our financial management that

are employees; utilities, supplies and other; marketing costs; rent; debt; taxes and financial market

indicators. And we establish our performance-based management compensation system.

Step 5: Implement the Chosen Alternative

Next, we create a plan for implementation. We identify and decide detailed budget or payment,

number, increased percentage of each point of seven aspects of financial management. You can see

the complete data decision below. Next, we monitor operations after implementing the plan to spot

any deviations and then take corrective actions.

2.5 Organizational and HR Management and Decision-making

For organization and HR management decision-making process, our group follows the process of

basic decision-making that has six steps below.

Step 1: Recognize the Need of a Decision

For this step, we have already recognized the needs of making the organization and HR

management decisions for our new bar. Because it enables us to get a better understand of different

organizational aspects of our bar and to decide the number and budget of the employees, salesman

and other workers’ compensation we need to prepare for our bar’s operation and management. We

also conduct Human Resource Management analysis.

Step 2: Generate Alternative

Based on brewery industry facts and operation experiences from other bars, we decide to determine

what information is relevant to our organizational aspects. We set a range of options to choose. For

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example, we set alternatives for employee aspect. For more efficient operation, we need to have

office assistants, salesmen, executive and consultants. We also expect to generate values for HRM

analysis to find alternatives for retain of production personnel and marketing personnel. 


Step 3: Assess Alternative

To choose best alternatives, our group evaluates their feasibility, acceptability and desirability. We

focus more on their importance and correlation with our basic operation. We assess different

alternatives of our office assistance, salesmen, executive salaries, and their growth rates in second

and third year.

Step 4: Choose Among Alternatives 


After applying different analysis to compare all alternatives, we decide to choose three aspects for

our financial management that are employees, employees’ compensation, workers’ compensation.

Step 5: Implement the Chosen Alternative

Next, we create a plan for implementation. We identify and decide detailed budget, number,

increased percentage of each point of aspects of organization management. You can see the

complete data decision below.

Step 6: Learn from Feedback

Finally, we adjusted the budget and salary increase of employees. As you can see from cycle 8

(Appendix ORG 01) to cycle 9 (Appendix ORG 02), we cut down the budget of office assistants,

salesmen and executive salaries but raised the budget of consultants. We also reduced the salary

increase of office assistants, executive salaries and consultant to 1.11 in FY-3 in order to cut down

the total cost of labor costs in the three consecutive financial years.

As is shown in the employees’ compensation part (Appendix ORG 03 & 04), we raised the base

compensation of critical salesmen from $30,000 to $30,500 in FY-1 and also raised the salary

increase of critical salesmen from 2% to 8% in FY-2 and FY-3. In total, we reduced the cost of labor

and increased the surplus. ! /!10 42

3. Application of Decision Support Tools

3.1 Decision Support Tool for Marketing Management

SWOT Analysis

We decide to use SWOT analysis to demonstrate the marketing situation of the new brewpub. The

reason we used SWOT is that we expected to improve marketing strategies and to reduce the break-

even point, and wanted to know our restaurant’s advantages over competitors in Chinatown and

weaknesses that we have to improve to reduce competitive disadvantage. Also the opportunities we

have to capture to improve our place and to be aware of external environment that could affect the

business, which including technological, environmental and regulatory factors.

We reduce a company’s breakeven point by reducing the variable costs per unit, increasing selling

prices, and increasing the sales by selling the greater proportion of the products having larger

contribution margins. And we will keep focusing on the existing strengths, which is the ability to

produce good quality beer. However, we will improve the way we stock different kind of beer in our

restaurant.

Strengths:

·Weekly special beer

·Strong marketing team

·New brewpub

·Prime location

Weaknesses:

·Lack of expertise

·complicated setup

·Not easily scalable

·High maintenance

Opportunities:

·Lower wait times

·Quick table turnover

·Reduced labor costs

Threats:

·Frozen pipes in winter

·Loss of sale on snow/rainy days

·Equipment malfunction

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Break-Even Analysis

By calculation, we came out with the BEP as followed. As we can see, the point is at 4.5 months

and 350000 dollars.

3.2 Decision Support Tool for Innovation Management

Sensitivity Analysis

Sensitivity analysis can determine how different values of an independent variable impact a

particular dependent variable under a given set of assumptions. This normally used within specific

boundaries that depend on one or more input variables, such as the effect that changes in interest

rates have on bond prices. Since we have to predict the beer price for next cycle, we choose to do

sensitivity analysis.

In sensitivity analysis table in D-analysis section, the minimum price in Variable Costs is $0.4 for

each beer and the base price for BR-01 and BR01-02 is $0.53, for BR01-03, BR01-04, BR01-05

and BR01-06 is $0.50, for BR01-07, BR01-08, BR01-09 and BR01-10 is $0.41. Since we made a

survey of the beer price in Chinatown, we reset the market research price to $5.00 for BR-01 and

BR-02, same as the price we set in cycle 2.

What-if Analysis

What-if Analysis is the process of determining the effects on outcomes in a statistical model or

spreadsheet calculation through systematic changes in the input. For the purpose of evaluating the

result of reducing material price, what-if analysis can suggest whether decreasing the fixed cost can

cause a better outcome.

3.3 Decision Support Tool for Operations Management

Optimization analysis

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Our main objective is to maximize our profits by keep changing the variable and constraints in

optimization analysis. We decide to adjust the price of our products based on the variables, such as

raw material, labor and market size. Through applying optimization analysis tool, we can decide

what adjustment we can make on products and market size to maximize our profits in operation. In

other words, we want to find out the optimal selling price for each product and also meet market

demand. If a product has high demand but the production capacity is not enough to produce them,

we would loss customers. On the other hand, if a product has low demand, then we need to stop

overproducing it to avoid unnecessary expand. Based on the cutoff point change we’ve made on

some products, we decide the base of variable costs as 0.82 for each product. We have the min value

of variable cost as 0.40 and max as 0.90. Then we apply the solver to do the optimization analysis.

According to our result on the solver, it turned out that min value of variable costs is precisely 0.4

and max is 0.9. It shows that we actually at a reasonable range of variable costs. As a result, we

found the optimal targeted market size for each product, which would be applied to the next cycle.

SWOT analysis

SWOT analysis can be really useful when we need to evaluate internal and external factors, which

would possibly impact the operation of the company. These factors should all be considered when

making any further decision on the operation of the company, including adjusting variable costs or

market size.

Strength—After analyzing local market situation in Chinatown, we found few competitors in this

area. Although there are many pubs or bar in Chinatown, there are few brewpubs, which would sell

self-made beer. As a result, we can view it as an opportunity and to put more emphasis on marketing

our self-brewing beer. We also have launched our own new product called “Sober” which might

attract more new customers’ attention.

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Weakness—Our price of each product is relatively low compared to other brewpub in Chinatown.

Our most expensive beer is only selling for 5 dollars. As a result, we need to put efforts on

attracting more and regular visitors and to emphasize our cheap but quality beer.

Opportunities—We provide our customers free samples of up to 5 different beers in out brewpub. In

other words, people can try a few mouthfuls of 5 different beers before they make purchase. We

would also train our employees to explain characteristics of different beer professionally. We would

also hold music events and invite local DJs to perform in our brewpub occasionally. In addition, we

also have a perfect location for opening a brewpub. We have many potential customers such as BU

students or tourists visiting Boston University.

Threats—The rent in this area increases every year. As a result, we need to make profits in a short

period of time in order to afford the rent.

3.4 Decision Support Tool for Financial Management

Break-Even Analysis

To use this analysis method, our group first identifies and classifies the variable costs that change

when the production output changes and fixed costs that not directly related to the volume of

production. We enter the data of revenue, expenses, total fixed costs and contribution of the total

brand and each product in the first financial year. And calculate the contribution margin of them.

And then, we compare total fixed costs, total revenue and the total cost to find the point at which

neither profit nor loss---“break-even point”. We calculate the break- even for months is 3.72, which

equals total fixed costs/ contribution* 12 months and the break-even for sales is US$ 308,918,

which equals total fixed costs/ contribution margin. And we also calculate the X-axis range, fixed

cost range, total revenue range and total cost range.

We can see from the chart that the break-even point is the point of intersection of the total revenue

line and total cost line. So when total revenue line is above the total cost line, our bar will have

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profits, and when total revenue line is below the total cost line, our bar will make a loss. And at the

point of intersection, the break-even point, costs are exactly equal to income, and our bar will make

neither profit nor loss.

Risk Analysis

To measure the probability of our bar’s success or failure and the possible future economic states,

we use risk analysis to analyze our bar. After entering the relevant data for calculating, we get the

chart of three financial year’s profit after taxed chart. In each chart, the red column is representing

the cycle 8. As a result, we gain the outcome from these charts below to identify the financial

management risk. For FY-1, cycle 8’s average (profit) is US $242,015, failure rate (profit) is 2.0%,

and standard deviation (profit) is US$ 55,530. For FY-2, cycle 8’s average (profit) is US $118,760,

failure rate (profit) is 5.0%, and standard deviation (profit) is US$ 63,307. For FY-3, cycle 8’s

average (profit) is US $105,893, failure rate (profit) is 8.0%, and standard deviation (profit) is US$

70,198. In addition, we also analyze the 36 months profit after taxed (in thousand), and get the

outcome for cycle 8 that the average (profit) is US$366,667, failure rate (profit) is 2.0%, standard

deviation (profit) is US$ 99,834, average IRR is 68.64%, failure rate (return on investment) is 3.0%

and standard deviation (IRR) is 25.97%.

3.5 Decision Support Tool for Organizational and HR Management

Optimization Analysis

We conduct optimization analysis to find optimum value for a target variable under given

circumstances. It is widely used for making decisions related to optimum utilization of resources in

an organization. During optimization analysis, the values for one or more variables are changed

repeatedly. Therefore, we need to keep in mind the specific constraints, until the best values for

target variable are found. They can, for example, determine the highest level of production that can

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be achieved by varying job assignments to workers. Some workers are skilled and their job

assignment cannot be changed. Solver tool in Microsoft excel are used for making optimization

analysis (Appendix ORG 05). We assigned employees to available offices to maximize satisfaction

of employee preference. We scheduled workers for weekly “shifts” (five works days plus two

consecutive days off) to minimize payroll costs while meeting varying demand of each day of the

week, optionally taking into account employee seniority and preferences. We decide how many

employees to retrain, hire and fire to meet changing workforce composition requirements while

minimizing costs or employee turnover.

SWOT Analysis

Strengths 


Strengths are internal factors that enable HR strategy and functionality. HR strategy refers to long-

term goals, such as building a top-tier workforce or becoming an employer of choice. We conduct

open enrollment sessions for employees to select new health insurance coverage. Our internal

strengths are executive leadership who support and promote HR strategic development and HR staff

knowledge and expertise because they are the employees ultimately responsible for carrying out

tactical duties. As is shown in the chart below (ORG 06 SWOT Analysis- Strength), we have

obvious strength in operation and research & engineering over other three competitors.

Organization strength is not prominent, therefore, we decided to strengthen the unity of values and

clarity of purpose in our organization.

Weaknesses 


Weaknesses also are internal factors that pose challenges to the success of HR endeavors. Internally,

budget constraints and cuts are conditions that HR often has to deal with, primarily because HR isn't

a revenue-producing department. As we have cut down a huge budget of employees, HR has to rely

on sound justification to fund investments in HR activities. However, money isn't the only ! /!16 42

weakness. Low employee morale and high turnover are serious internal factors that can disrupt HR.

In this case, disruption refers to immediate and reactive measures HR must take to reverse an

overwhelming sense of dissatisfaction throughout the workforce. As is shown in the chart below

(Appendix ORG 07 SWOT Analysis-Weakness), our biggest weakness is political reason such as

funding, grants and initiative, home market lobbying and pressure groups, internal political issues

and so on. Fortunately, our personnel turnover is not as high as our competitors, which means we

have a strong employee loyalty.

Opportunities 


One of the most significant external factors for HR is the opportunity for workforce growth, due to

increased demand for the company's products and services. More business translates into better

raises or higher wages for current employees, along with growth for the surrounding community

through the hiring of more workers. External factors also may present themselves as the company's

ability to land a highly successful rainmaker whose business development activities improve the

company's reputation or industry ranking. As is shown in the chart below (Appendix ORG 08

SWOT Analysis- Opportunity), our opportunities lie in economic and technological factors. We

have higher production level over our competitors and our internal finance situation is relatively

good. Besides, we have competing technology development, manufacturing maturity and capacity,

and huge innovation potential.

Threats

Threats are external factors that negatively impact the company and, ultimately, the HR department.

When a competitor gains an edge in the market share, it affects profitability and may result in

layoffs, business slowdown or closure. Other types of external threats include businesses — not

necessarily in the same industry — that offer better working conditions, wages or benefits to their

employees and, therefore, recruit the best-qualified workers. HR departments can't always insulate

themselves from all external factors because some are imminent. However, HR can diminish the ! /!17 42

impact of external threats through conducting routine assessments of compensation structure,

surveying employee opinion on working conditions and strengthening the employer-employee

relationship through showing HR as a strategic business partner that values human capital. As is

shown in the chart below (Appendix ORG 09 SWOT Analysis- Threat), economic factors are also

the biggest threat, such as market routes and distribution, job growth and so on. Legal and social

factors will also threaten our business. For example, lifestyle and people’s attitude toward food may

change and they pursue a healthy lifestyle, then they will not choose to go to our pub.

4. Evaluation of the Result of the Business Simulation

4.1 Comparison Based on Marketing Management

We notice that in different cycles, the figures in targeted market size are different. As we can see, in

FY-1, from cycle 1 to cycle 7, BR01-01 decreased from 23.00% to 20.00% and then climb back to

21.45%. BR01-02 had a same trade as BR01-01. Meanwhile, in cycle 1, 07 and 08 occupied 45%

and 55% in wholesale respectively, but in cycle 2, 07 has increased to 47% and 08 has been down to

53% and remain steady in cycle 5. In cycle 7, the data of 07 keep decreasing to 46.75% and 08 has

raised to 53.25%. In that case, we can calculate the demand quantity per month in cycle 1(Appendix

MKTG 11), cycle 2(Appendix MKTG 06), cycle 5(Appendix MKTG 12), and cycle 7(Appendix

MKTG 13).

As can be seen from the chart, in FY-1, BR01-01 and 02 are the most popular products because the

demand and supply are the most. Although BR01-03 and 04 not the most popular one, but there was

a large gap between demand and supply, and demand is more than supply.

We ran the trend analysis in cycle 2 and as a result, except the fix cost, others like revenue, expense,

contribution and profit BT , in every year, would showing a trend that increasing in the first three

quarters and reaching a peak at the third quarter, then decrease at the forth.

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4.2 Comparison Based on Innovation Management

Applying these two tools, the sensitivity analysis indicates that when our price is set at $6 for

BR01-01 and BR01-02, $5 for BR01-03 to BR01-07, we have the highest profit, however, in the

result of many inputs one output the recommendation price for the beer is $4 and $3.5 respectively.

We decide to adopt the many inputs one-output results, since we consider that the price is more

logically in the draft beer market. What-if analysis demonstrates the result of the assumptions in

adjusting fixed cost. The outcome indicates that after adjusting the variable cost in material in cycle

3, decrease the fixed cost may be a quite efficient operation to do.

4.3 Comparison Based on Operations Management

After we ran the business simulation on operation management, we increased the total net profit

after taxes from $780,137 to $838,817(OPT1).

After we made adjustments on cut-off point toward some products and variable costs, we found out

that the sales projection of future three years increases from 1,341,372 to 1,365,352. The result

proved that we had successfully become more efficiently on production.

4.4 Comparison Based on Financial Management

To identify the performance of the data outcome, we analyze some key performance indicators that

are actual size of the local market, number of customers existing business, average consumption per

existing customer, size of the penetrated market, projected increase of the penetrated market,

projected structure of the annual sales, projected sales, projected consumption, wholesale

distribution and capacity of the new technology. We calculate the units, numbers or percentage of

them in FY-0, FY- 1, FY-2, FY-3 and the summary of FY1, 2 and 3.

And then, we compare the projected consumption current cycle to project start in retail and

wholesale aspects and in three financial years. We can see that the project- start and current cycle ! /!19 42

are basically equal and increasing year by year in retail aspect. And in wholesales aspect, they have

big differences and also increasing year by year. And there is also a pie chart below to show the

percentage of retail aspect in wholesale aspect. We can see that the percentage is basically equal

from year one to year three in these two aspects.

Our revenue and expenses will keep the same leverage in three financial years, and the percentage

of profit before taw will decrease year by year. There is a line chart of our revenue, expenses,

contribution, fixed costs and profit BT in FY-1, FY-2, FY-3 and summary of FY-1, 2 and 3. We can

see the trend analysis outcome from this chart that our revenue, expenses, contribution, and profit

BT will have a large amount of increase in financial year 3 and keep basically same in FY-1 and

FY-2. And the fixed costs will increase year by year.

4.5 Comparison Based on Organizational and HR Management

To identify the performance of the data outcome, we analyzed some key success indicators that are

the utilization of introducing an individually controlled brand, retain of critical technology

personnel, retain of critical marketing personnel. We calculated the numbers or percentage of them

in FY-1, FY-2, FY-3. The data outcomes are shown in Appendix ORG 10 Key Success Indicators.

Besides, we also analyzed some key performance indicators that are actual size of the local market,

number of customers existing business, average consumption per existing customer, size of the

penetrated market, projected increase of the penetrated market, projected structure of the annual

sales, projected sales, projected consumption, wholesale distribution and capacity of the new

technology. We calculate the units, numbers or percentage of them in FY-0, FY-1, FY-2, FY-3 and

the summary of FY1, 2 and 3. Data outcomes are shown in Appendix ORG 11 Key Performance

Indicators. And then, we compare the projected consumption current cycle with project start in retail

and wholesale aspects in three financial years (Appendix ORG 12 Projected Consumption). We can

see that the retail in cycle 9 decreased 6.2% in FY-1, 7.4% in FY-2, 9.4% in FY-3 compared with

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those of project-start but it increased year by year. The wholesale in cycle 9 also dropped 2.1% in

FY-1, 2.5% in FY-2, 2.3% in FY-3 but it grows year by year. And there is also a pie chart below to

show the percentage of retail and wholesale in project-start and cycle 9. We can see that wholesale

is projected to take the major percentage of the distribution, accounting for about 70%.

After that, our group does the trend analysis. You can see the table and pie chart outcome below.

(Appendix ORG 13 Trend Analysis 1) Compensation will account for the majority of the total fixed

costs and increases year by year. Profit before tax are approximately 2.5 times of fixed cost and it

will increase year by year.

Our revenue and expenses will keep the same leverage in the consecutive three financial years, and

the percentage of profit before tax will decrease year by year. There is a line graph of our revenue,

expenses, contribution, fixed costs and profit before tax in FY-1, FY-2, FY-3 and summary of FY-1,

2 and 3 (Appendix ORG 14 Trend Analysis 2). We can see the trend analysis outcome from this

chart that our revenue, expenses, contribution, and profit BT will grow sharply from Q1 to Q3 and

decrease in Q4 in all the three consecutive financial years. And the fixed costs will keep the same in

all the three consecutive financial years.

5. Summary of the Results, Recommendations, and Conclusions

5.1 Summary of Results

The last business simulation cycle (cycle 11) shows our best result. Our profits steadily grow each

year. We generate total net profits 363,463, 401,642 and 435,864 respectively for next three year.

5.2 Recommendations

With each passing year, more businesses are setting up in the country, making the alcoholic

substances market much more intensely competitive. Almost all alcoholic substances industry

players practice traditional brewing services as well as product supply, making the supply of such ! /!21 42

common services significantly exceed their demand. In order to position themselves to take on the

market, most high profile alcoholic substance business especially in the area have begun to major in

alien areas of the alcoholic substances industry but still find themselves in common areas of

industry. Therefore, this new alcoholic substances business might be new entrants in the industry

but we have committed ourselves to focus on a less ventured product, being the rendering of online

supported products under areas of alcoholic substances industry which have a lot of potential and

little competition.

Most of the existing businesses that have ventured into these areas of services are very few in the

country but large and having financial muscle to influence big businesses and well- known figures

in the various alcoholic substances industry sections that the start- up business plans to major in.

This therefore gives your start- up business an opportunity to offer your services to the small scale

and mid-sized clients as well as individuals in the various sectors who may not afford the services

of the well-established businesses.

5.3 Implementation Plan for the Selected Strategy

At the beginning phase of our project, we decided to invest $1,000,000 for the fixed cost, including

rent, employee salaries, utilities, and marketing cost etc., and variable costs. Then we put a total of

$15,000 to purchase a micro-brewery system. To sum up , we need 1,040,000 upfront capital to start

a new brewpub in Chinatown. The implementation plan for the selected strategy is listed as below:

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Implementation Plan

# Tasks & Sub-Tasks Duration(days) Start date Finish date Predecessor Upfront Funds($)

1 Investment decision 9 2018/3/11 2018/3/20 None

2 To accept the offer

and invest $1,000,000 9 2018/3/11 2018/3/20 None US$1,000,000

3

Prepare a business plan for the new

business unit and secure finances

12 2018/3/20 2018/4/1 Investment decision

4

Purchase the microbrewery system

and arrange transportation

14 2018/4/1 2018/4/15

Prepare a business plan for the new business unit and secure

finances

US$15,000

5

Prepare the production and distribution site for the new business unit 19 2018/4/1 2018/4/20

Prepare a business plan for the new business unit and secure

finances

US$3,000

6

Hire the relevant personnel to operate

the brewery

29 2018/4/1 2018/4/30

Prepare a business plan for the new business unit and secure

finances

US$5,000

7

Installation of the system and training of

the personnel 10 2018/4/30 2018/5/10

Hire the relevant personnel to operate the

brewery

US$2,000

8

Marketing campaign to increase the

awareness of the new offering

59 2018/4/1 2018/5/30

Prepare a business plan for the new business unit and secure

finances

US$15,000

9

Enter into multi-year contracts with pre-

selected buyers 15 2018/4/30 2018/5/15

Installation of the system and

training of the personnel

US$1,040,000

10

Monitor business metrics closely and take any necessary

action quickly to avoid failure

Forever 2018/5/15 Forever

Enter into multi- year contracts

with pre- selected buyers

5.4 Conclusions

By following the implementation plan, we are confident about the opening of our new brewpub. We

would focusing on advertising our home made beer and distinguish ourselves from other

competitors in the area. Since there are only few competitors, we are planning to open one more

brewpub in this area to attract more local customers following similar decision-making strategy.

6. Appendixes

• Marketing Management

Appendix MKTG 1: Product Name & Description ( Cycle 1 & Cycle 5)

Appendix MKTG 2: Break-even Analysis Chart

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Appendix MKTG 3: Targeted Market Size ( Cycle 2 &Cycle 5 & Cycle 7)

Appendix MKTG 4: Sales Projection

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Appendix MKTG 5: Efficiency Ratios

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• Innovation Management

Appendix INNO 1: Product Name & Description ( Cycle 3)

Appendix INNO 2: Sensitivity Analysis

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Appendix INNO 3: What-if Analysis

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• Operation Management

Appendix OPER 1: Forecast for the Next Three Years

Before

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After

Appendix OPER 2: Optimization Analysis

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Appendix OPER 3: Comparison of Net Profit (After Taxes) Between Cycle 5 and Cycle 6)

• Financial Management

Appendix FIN 1: Employees & Utilities, Suppliers and Others & Marketing Costs

Appendix FIN 2: Rent, Debt, Taxes, and Financial Market Indicators

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Appendix FIN 3:

Appendix FIN 4: Break-Even Analysis ( Cycle 8) -1

Appendix FIN 5: Break-Even Analysis ( Cycle 8) -2

Appendix FIN 6: Risk Analysis -1

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Appendix FIN 7: Risk Analysis -2

Appendix FIN 8: Risk Analysis -3

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Appendix FIN 9: Risk Analysis -4

Appendix FIN 10: Performance -1

Appendix FIN 11: Performance -2

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Appendix FIN 12: Performance -3

Appendix FIN 13: Performance -4

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Appendix FIN 14: Performance -5

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• Organization and HR Management

Appendix ORG 01: Human Resources ( Cycle 8)

Appendix ORG 02: Human Resources ( Cycle 9)

Appendix ORG 03: Employees’ Compensation & Workers’ Compensation ( Cycle 8)

Appendix ORG 04: Employees’ Compensation & Workers’ Compensation ( Cycle 9)

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Appendix ORG 05: Optimization Analysis ( Cycle 9)

Appendix 0RG 06: SWOT Analysis -Strengths

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Appendix 0RG 07: SWOT Analysis -Weakness

Appendix 0RG 08: SWOT Analysis -Opportunities

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Appendix 0RG 09: SWOT Analysis -Threats

Appendix 0RG 10: Key Success Indicators

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Appendix 0RG 11: Key Performance Indicators

Appendix 0RG 12: Projected Consumption

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Appendix 0RG 13: Trend Analysis 1

Appendix 0RG 13: Trend Analysis 2

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