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Unit 18 - Business Expansion - Regent College - Level 5

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Introduction

Business expansion is crucial decision for organisation to expand its operations in the best possible manner. Present report deals with Duque Papertiers Gros who is businessman and it is planning to expand operations in German market as it is big market for stationery products. In this report, annual sales data is being interpreted and also trend forecast is provided for next two years. Furthermore, descriptive statistical tools are applied for making decision whether to expand or not in new market.

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TASK 1

1.1 Overview of German stationers market

The German stationers market is one of the important part of the nation as it generates good quantum of revenue in effective manner. This market adds to GDP (Gross Domestic Product) of the country and as such, it helps to enhance nation's growth in the best possible manner. This is evident from the fact that writing and other related stationery product are highly spent in the nation which means that it is more in comparison of European countries. In relation to this, annual turnover of stationers market of Germany is 14.8 billion per year and as such, it is increasing year by year which implies that the economic growth of nation is injected up to high extent. Furthermore, 35.2 is spent only on writing materials which clearly shows that nation is ranked second in comparison to European nations (Bordo and Haubrich, 2017).

On the other hand, due to the digitisation in today's scenario, sales have gone down significantly. The main product which is declined are writing materials due to computerised world. However, growth of stationers market is due to the fact that products are sold directly by the wholesalers to customers without any middlemen in the chain. This help wholesalers to earn profit in effective manner as costs are reduced which lowers down revenue. Seeking the growth of stationers market, big names in pharmaceutical sector have started selling products to customers and as such, business are diversified in order to gain revenue. Hypermarkets and supermarkets have also adopted this policy for attaining revenue. Hence, German wholesale stationers market is effective for business to expand its operations.

TASK 2

2.1 Annual spending on writing materials in European countries

Graphs eases to interpret data in effective manner and provides clarity to business for extracting useful information with much ease. Furthermore, data is gathered of European countries which shows annual spending on stationers market. The below graph shows spending per capita income of nations. In accordance to graph, Switzerland is one of the highest spending country on writing materials with spending of 35.5. On the other hand, second position is secured by Germany that is already discussed in preceding paragraph which is 35.2 annual spent. On third position is Austria with annual spending of 35 euros. While, fourth position is attained by France with spending of 28.3 and on fifth position is Slovenia having annual spending of 20.4 (West and Nikolai, 2017).

Furthermore, next position is secured by Italy with difference of 1.8 from Slovenia having 18.6 euros. While, seventh rank is provided to Slovakia having much difference from previous nation. This means that annual spending on stationers' product is low in comparison to Slovenia. Moreover, spending is 9.8 which is low. While, on eighth position is secured by Hungary with spending of 9.6 euros. Furthermore, Spain is on the ninth position with 8.9 position. While, next position is imparted to Poland with spending of 8.5. Moreover, next stage of annual spending of 7.9 by Croatia and last position is provided to Czech Republic of spending of 7.6 euros. Thus, it can be analysed that Switzerland is one of the highest nation which spent on the stationery products while Germany comes at second position. This means that Duque Papetiers Gros can easily expand its reach to German market to earn revenue.

TASK 3

3.1 Analysis of sales on the financials

Interpretation

It can be interpreted from the above data that correlation coefficient is good as it is 0.73. The statistical technique which is correlation coefficient signifies relationship among variables to understand whether perfect correlation exist or not. The value ranges from -1 to +1 which shows relationship between two variables. On the other hand, it can be analysed that business has 0.73 value of correlation and it implies that sales are moderate and is increasing of the firm. The correlation value should not be less than -1 as it shows clearly that there is no relationship between variables (Correlation coefficient. 2018). Furthermore, it can be said that business will be able to earn revenue in German stationers market as it is depicted by scatter diagram.

Moreover, sales and forecasted data shows that business would garner good amount of revenue which means that it can expand its operations to Germany in order to earn revenue quite effectively. Furthermore, correlation value is nearer to 1 which implies that firm may be able to earn profits with much ease. The sales are on upward trend and it clearly signifies that firm will be able to earn revenue in German market as well. Thus, correlation coefficient shows business can easily expand to the nation in search of desired profits (Young, 2017).

  1. D) Trend in future

The trend can be carried out from the equation obtained in the scatter diagram in the best possible manner. Forecasted trend for 2018 and 2019 are listed below-

Trend in 2018

The equation is Y = 6500 x + 162000, Putting 4 in x, we get

= 6500 * 4 + 162000

= 188000

Trend in 2019

= 6500 * 5 +162000

= 194500

It can be analysed that firm would be able to earn profits in next years in effective manner. This is evident from the fact that trend in 2018 would be 188000 and in next year, it would be 194500 which implies that business will enrich in German market.

TASK 4

4.1 German expansion of business

Should I expand my business to Belgium & Germany?

 

Pros

Score/10

Cons

Score/10

Maximum consumer satisfaction

3.5

Requirement of additional capital

1

Enhanced revenue

3

More expenditures

2

large scale of business

1

   
       
       

Total Pros

7.5

Total Cons

3

Average Pros

2.5

Average Cons

1.5

         

It can be interpreted that Duque Papetiers Gros should expand its business operations to the German market as the firm would be able to gain market share. Moreover, revenue will be injected in the best possible manner. Furthermore, firm will be able to inject profits as sales data clarifies that it can easily generate sales in new market. Moreover, Germany is the second highest nation in terms of annual spending in writing materials in effective manner. Furthermore, German stationers market is type of wholesalers and as such, without incurring expenditures on middlemen, wholesalers earn profits with much ease (Petersson, 2018). This is the major reason for expanding operations to the nation in search of revenue in the best possible manner.

The above table shows the pros and cons of whether it should expand to Germany and Belgium or not. It can be analysed that there are more advantages of expanding business reach to German market as compared to disadvantages. This is evident from the fact that average value of pros is 2.5 and that of cons is 1.5. It shows that business may easily expand its operations in the market for producing more profits in the best possible manner. The pros highlighted are maximum consumer satisfaction, enhanced revenue and large scale of business and as such, it can be analysed that firm will generate profits and as a result, it should expand its reach to new market. The business will be able to earn revenue by selling products to commercial purpose and as such, new stationery commodities could be provided by the firm with much ease. On the other hand, cons are requirement of additional capital and increment in expenditures. However, cons are less in comparison to pros and as such, firm should reach out to German stationers market to extract benefits quite effectually (Mucciarelli, 2017).

  1. B) International standards
  • ISO 45001- Social responsibility

This certifies that organisation should maintain social welfare by imparting better products in effective manner.

  • ISO 31000- Risk management

This international standard provides that business should provide adequate safety standard to employees and thereby, imparting safety in case of any uncertainties.

TASK 5

5.1 Mortgage cost of new building

The mortgage cost is calculated below-

Duration = 30 years

r = mortgage interest rate

Thus, by applying formula, we get

= Loan amount / Discount rate

= 200000 / ({[(1 + 0.10) ^ 30] – 1} / [0.10 (1 + 0.10) ^ 30])

= 200000 / 9.42

= 21215.85

In relation to this, monthly repayment comes to

= 21215.85 / 12

= 1767.8

  1. B) Re-calculating mortgage cost

Number of days (N) = 360

r = 10 % / 12

= 0.00833 / month

= 200000 / ({[(1 + 0.00833) ^ 360] – 1} / [0.00833(1 + 0.00833) ^ 360])

= 200000 / 113.99

= 1754.55

Hence, cost of mortgage is 1754.55 for expansion in Germany

TASK 6

6.1 Mean value of orders

Here, Hypothesis testing needs to be applied

H0= There is no significant difference between mean value of orders and sample mean

H1= There is significant difference between mean value of orders and sample mean

z test,

z = (x – μ) / σ

z = 240-230 / 43

= 0.23

It can be interpreted that value of null hypothesis is accepted at 5 % significance level and as such, there is no significant difference between both variables as value is 0.59. Normal distribution curve has been applied and normal population is assumed.

TASK 7

7.1 Customer satisfaction

A) Ways for improving responsive rate

The firm has low responsive rate and as such, it is required that rate should be improved in order to attain clarity about views and preferences of customers in effective manner (Mercer, 2017). The rate is less than 5 % and as such, it is suggested that short and concise questionnaires should be provided to customers so that quick response can be attained from them. In relation to this, respondents should be asked for providing information and purpose should also be conveyed to them. This way, answers can be garnered in effective manner.

B) Descriptive statistics

 

CUST_SERV

QUAL_P&S

SALES_STAFF

PRICE_VALUE

 

3

3

3

3

 

3

3

3

2

 

4

4

4

2

 

4

3

4

1

 

2

3

2

2

 

4

4

4

2

 

4

3

4

2

 

4

3

4

2

 

2

3

2

2

 

4

3

4

1

 

4

3

4

2

 

4

3

4

2

 

4

3

4

2

 

4

3

4

1

 

2

3

2

2

 

4

3

4

2

 

4

4

4

2

 

3

3

3

3

 

4

3

4

2

 

3

3

2

2

Arithmetic mean

3.5

3.15

3.45

1.95

Standard Deviation (STDEV)

0.7608859103

0.3663475485

0.8255779475

0.5104177855

It can be interpreted that firm has good arithmetic mean and standard deviation. Price value rating is lowest as it is 1.95. This implies that business should cut-down costs to earn higher rating.

Conclusion

Hereby it can be concluded that business has effectively earned revenue as it is evident from the past sales data. Duque Papertiers Gros should expand his operations in German stationers market in order to garner more customers and gain profits with much ease. Firm should expand as it will be able to sell stationery goods to commercial customers and as such, it can easily attain objectives in the best possible manner. Moreover, purchasing power of Germans are good as well which will be beneficial for firm in gaining revenue. Furthermore, it is also clarified from the descriptive statistics that price should be kept low in order to attain more customer base and also higher rating can be garnered in effective manner. In relation to this, correlation coefficient value is also good which means that business should expand its operations in German market for garnering more revenue.

References

  • Bordo, M. D. and Haubrich, J. G., 2017. Deep recessions, fast recoveries, and financial crises: Evidence from the American record.Economic Inquiry.55(1). pp.527-541.
  • Mercer, H., 2017. The making of the modern retail market: economic theory, business interests and economic policy in the passage of the 1964 Resale Prices Act.Business History. 59(5). pp.778-801.
  • Mucciarelli, F. M., 2017. Employee Insolvency Priorities and Employment Protection in France, Germany, and the United Kingdom.Journal of Law and Society.44(2). pp.255-282.
  • Petersson, N. P., 2018. Managing a “People Business” in Times of Uncertainty: Human Resources Strategy at Ocean Transport & Trading in the 1970s.Enterprise & Society.19(1). pp.88-123.
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