ASSIGNMENT Business decision making

Name: Michael Alan Smith

Address: Sluzska 780/36

Praha 8
Czech Republic

Post code / Zip: 182 00

Telephone No: 00420 608 52 11 96

Email Address: michaelalan.smith@yahoo.com

Date: 28-05-2011

Course Name: HNC

Tutor Name: Clive Findlay

Assignment Collection of Data

Name:

Introduction
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This assignment will look at the use of a variety of sources for the collection of data. This will
include both primary and secondary forms. To demonstrate this I will prepare and implement a plan
for the collection of both the primary and the secondary forms of data for a business problem. I will
describe and justify the survey methodology and the frame used. I will also develop and use a
questionnaire and also justify its design for a particular purpose.

Primary and secondary data

To begin this assignment we will firstly look at the different types of both primary and secondary
forms of data and give descriptions of where and how these can be obtained. Included in this will
be difference between quantitative and qualitative forms of data. I will also look at some of
advantages and disadvantages for both forms of data.

Primary Data

What do we mean when we talk about primary data? The basic definition would be as following:
data gathered first hand or data that does not exist until you collect it. It can sometimes be referred
to field work.

The gathering of primary data is normally in the form of surveys or questionnaires; and these can
be by post, face to face, by phone or as we see commonly today by internet. I can be either in the
form of an e-mail (electronic mail) or by internet web sites. As a user of Yahoo I very often get
requests to take satisfaction surveys from them on the level of their service. One may also receive
these types of request from organisations such as Microsoft; this can happen when you register
their software on-line for instance.

For these types of surveys and questionnaires there are always advantages and disadvantages.
Some of the advantages can vary by cost. It can be much cheaper to send out a questionnaire by
post or by e mail so a larger number can be sent giving a greater chance to obtain the required
number of responses. A disadvantage can be that you have no interaction with the respondent or
the questions can be misunderstood or they can fill in what they think you want them to say, or they
can simple just lie. With face to face or phone surveys and questionnaires you do have the
advantage of the interaction, but the cost would be higher. However, you could be more selective
about who you talk to, there may be less chances of misunderstanding as the questions could be
explained if needed. Here you need to very careful not enter bias in to the results by guiding the
responded to answer in a specific way. Another major disadvantage with phone interviews is that
you can only include people with land line phones as these are the only people in phone
directories. Depending on the type of survey being conducted this could already bias the results.
For instance if a phone survey was being conducted in to poverty levels in a certain area, it
probably would not capture a true unbiased result, if you can afford a phone, you may not be
considered to be in poverty.

Another form a data collection is a market research, and here we have what is called test
marketing. A sample product is placed in a store to determine demand or for instance taste testing,
not seen so much now in the UK but still a very popular way to carryout research on new product in
countries though out Europe. For instance in Prague in the Czech Republic some Tesco stores
have a purpose build areas for customer to taste testing surveys on new products that might be
sold in the stores. You also have what is called competitor scans where you visit stores that may
carry the same or similar products or services to the one you wish to provide. And here you would
collect any promotional material and/or point of sale material, and gather any information on pricing
structures that may be useful to you.

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Data collection can also be represented in the form of interviews either face to face or by phone.
Here the interviewee would be asked question specific to the subject and allowed to answer them
in their own words. There are several disadvantages to this type of data collection and some of
these can be difficulty in quantifying the interviewees responses; the same question can be asked
to 10 different people and you can get 10 different answers; also there is a much higher chance of
bias entering in to the results, this can happen easily if the interviewer start to guild the interviewee
to the answer they want.

Secondary data

This is an approach when you use data gathered by someone elses primary research. The use of
secondary data can be very useful in terms of cost effectiveness. Before carrying out what could
be a very expensive primary research, is there any secondary research or data that has already
been done on the same subject matter? There are as always advantages and disadvantages to
the use of secondary data. Some of the advantages can be the cost savings, its availability. A big
advantage can be in the research of another organisation, data can be gathered on them without
alerting them to research being done, for instance annual reports, details from company house and
almost all companies now have web sites that contain a huge amount of data on them.

Some of the disadvantages can be that once you have bought the data or spent time searching for
it, it may not be exactly what you need, it may not cover what you need it to. You will not know if
the data was bias or not as you may not know where it came from. The research of secondary data
can give good guide lines as to how you may want or need to carry out your own primary research.
It can give you ideas on what types of questions should be asked, but more importantly it can help
you decide what type of research to carry out, should it be quantitative or qualitative and also how
to define and measure and quantify the answer into meaningful results.

Collection of data and methodology

Lets now look at how the collection of both primary and secondary forms of data could be used to
help in a given business problem.

As an example lets look at an import/export company that wants to introduce a new brand of wine
in to the market. Before they take on the expense of buying transporting and storing the goods they
want to get an understanding of current market sectors for their new product. Is there any gap in
the market their product could fill or are they going to have to try to take a share of an existing
market sector?

To begin with, they may want to do some basic secondary research. This could include searching
for any market research or surveys that have been taken in the past on the drinking habits of
different areas of the country. This way they may be able to target areas where there is a higher
population of wine drinkers or higher consumption of wine or looking for certain age groups that
they may target the new product at. If they can identify these they may be able to carry out primary
research in the form of surveys or questionnaires in different forms of media aimed at the same
groups.
They may also want to research companies that already exist and specialise in the distribution of
the same product, the cost of different types of existing products and where they may be placed. If
different areas or groups can be identified, the company may then decide to carry out some
primary research, as this is a product they will be aimed at adult drinkers they could use the
electoral roles, identified areas to target people aged over the age of 18. As this would only include
them, it would not however include any drinking habits to the company would have to full postal
survey in the area, they may be able to gather information from the national census in to people life
style habits. They may carry out market research in either specialist outlets for they product and

3
then ask for a questionnaire to be filled in; this information could then be analysed to determine
how satisfied people were with their new product.

Questionnaire

The type of questionnaire that could be used on the above problem could be on the likert scale
whereby you give the respondent a simple choice of how much they liked or disliked something.
For a product like a new brand of wine this simple closed question would work the best. If you
allow the respondent to answer in their own words it would be hard to quantify the results of the
questionnaire.

The questionnaire should be kept small with a max of perhaps 10 questions. The reason for this is
if you are carrying out market research in the form of taste testing, you would be asking people to
take the time there and then to fill in the questionnaire. You would not want it take too long as this
may put them off answering the question or they may just tick the first box they see without really
reading or understanding the question being asked.

The questionnaire may want to include questions such as:

1. Per month, how many bottles of wine do you buy, 1-3, 3-5, 5-7, 7-10
2. If you see a new wine do you try it? Never, occasionally, always, if recommended
3. Did this wine compared to your normal wine? Much worst, worst, same, better, much better
4. If you saw this wine would you buy it : Yes, no
5. What price would you pay for this product: 0-5, 5-10, 10-15, 15-20, 20+

By asking these types of closed questions the results could be measured easily to determine if
people liked the wine, if they would change from their normal brand to the new one, and what
prices they would be willing to pay for it. With this type if research the company could then make
decision on whether there may be a market for their new product, they may be able to estimate the
volume they would sell, and importantly at what price they could be able to sell the product for.
With this information they would be able to determine if there would in fact be any profit to make.
People may like the wine but they may not be willing to pay the price it would have to be sold at if it
was too high. As we can see from the above the collection and analysis of data for business
decisions is a very important and one that should not be overlooked or underestimated as it could
make the difference failing and succeeding.

Conclusion

In this assignment we looked at the use of a variety of sources for the collection of data. This
includes both primary and secondary forms. This was demonstrate by the preparation and
implementation of a plan for the collection of both the primary and the secondary forms of data for
the given business problem. The assignment also described and justified the survey methodology
and the frame used. Along with the development and use of a questionnaire and also justified its
design for the particular purpose.

Sources of data

Web sites:

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http://www.entrepreneur.com/encyclopedia/term/82400.html
http://www.businessdictionary.com/definition/primary-research.html
http://www.entrepreneur.com/encyclopedia/term/82616.html
http://www.marketresearchworld.net/index.php?option=com_content&task=view&id=810
http://en.wikipedia.org/wiki/Secondary_data

ASSIGNMENT Business decision making

5
Name: Michael Alan Smith

Address: Sluzska 780/36

Praha 8
Czech Republic

Post code / Zip: 182 00

Telephone No: 00420 608 52 11 96

Email Address: michaelalan.smith@yahoo.com

Date: 11-06-2011

Course Name: HNC

Tutor Name: Clive Findlay

Assignment Effective data analyses

Name:

Introduction

In this assignment I will be applying a range of techniques to analyse data effectively for business
purposes. In doing this I will be creating information that can be used for decision making by

6
summarising, data using representative values. I will be using the results to draw valid and useful
conclusions that can be used in a business context.

In addition to this I will also be analysing data using measures of dispersion, and I will use this to
inform a given business scenario. Finally I will demonstrate how to calculate quartiles, percentiles
and correlation coefficients and will use them to draw useful conclusions in a business context.

Information

In all businesses day in day out decisions are being made and these decisions are being based on
data and the correct analyses of it. And this is true in all forms of businesses from banking to brick
lying, for example how many bricks can be laid by each person working in any given day.

In the following section I try to demonstrate how the correct gathering and analysing of data can be
used to help make these decisions.

Lets begin with a simple example of an output from a single machine in a production plant; to
begin with we can gather some basic data on this in the form of weekly output by 2 shifts working
machine.

Monday Tuesday Wednesday Thursday Friday

shift 1,
units
produced 25 24 16 26 28
shift 2,
units
produced 26 20 22 26 24

The data table above is giving some simple information but this can be shown in a bar chart format
to be able give a clear visual comparison for the 2 shifts over the period of 1 week working Monday
to Friday.

The only real conclusions that can be made from the above data is that both shifts have produced
almost the same amount of units, shift 1 producing a total of 118 and shift 2 producing a total of
119, we can see that both shifts are producing about the same amounts each day. Based on the
above information we could make the decision that both shifts are working the same and output is
even over both shifts.
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However this form of data may not be considered useful in order to be able to make decision such
as production planning, forecasting, manning levels and hours worked, and planned maintenance
or calculating affiance levels per shift.

If we gather some additional data we may start to a different picture forming.

For example if we look at the machine speed for both shifts, or manning levels, number of break
downs per shift we can start to make some decision based on the new data.

machine break
manning speed downs
shift 1 8 9 8
shift 2 6 11 4

As we can now start to see shift 2 is running with less people, the machines are running faster and
the break downs less. This would indicate that shift 2 is in fact running more efficiently than shift 1.
From here you could then start to make decision based on more in depth data as what the
difference are between the 2 shifts. We can begin to see how important the gathering and
analysing of data can be to obtain a full overveiw to any given operation with a business and how
not gathering the correct data can lead to the wrong conclutions being made.

Dispersion

What is meant by dispersion? Simply put, it can be a spread of data ranging from the lowest to the
highest. We often need to measure the extent to which a dataset differs from each other; this is
very often seen in finance industries measuring the highest and lowest point of sales of stocks and
shares over a given period of time. Air temperatures or sea temperatures can be measured to
determine the dispersion of them.

There are several measures of dispersion, these include standard deviation, range, inter-quartile
percentile, and these will be covered in the next section. The most common measurement is being
the standard deviation. These measures all indicate to what degree the data set are dispersed or
'spread out' around their mean average.

8
Lets look at a simple example of this and demonstrate how to calculate this number. If we look at
the cost of goods sold by 7 sales person sold over the period of a week.

Sales 1 Sales 2 Sales 3 Sales 4 Sales 5 Sales 6 Sales 7 total

515 620 459 399 412 710 562 3677

To calculate the standard deviation you need to calculate the mean of the data set. To do this you
add up all of the data set and divide it by the total number of inputs. So in this case the total is
3677 and there are 7 sales persons so 3677/7 gives you a mean average of 525.

The next step is to calculate the deviance of each piece of data from the mean of the data set.

To do this you need to subtract the total mean from each data set.

Sales 1 Sales 2 Sales 3 Sales 4 Sales 5 Sales 6 Sales 7 total

515 620 459 399 412 710 562 3677
525 525 525 525 525 525 525 mean
-10 95 -66 -126 -113 185 37 deviation

Next you have to square each of the deviations.

Sales 1 Sales 2 Sales 3 Sales 4 Sales 5 Sales 6 Sales 7 total

515 620 459 399 412 710 562 3677
525 525 525 525 525 525 525 mean
-10 95 -66 -126 -113 185 37 deviasion
deviation
100 9025 4356 15876 12769 34225 1369 77720 squared

The next step is to add each of the squared deviations 77720 and divide this number with the
number in the data set, so in this case by 7 and the number you get is: 11102.

The final step is to take this number and find the square root of it; this final number if the deviation
so the standard deviation for the data set above is 105.

However, it is necessary to be careful on the final steps as there are two options that can be made.
The above example is based on the dataset being that of the total population, however, if your
dataset is an sample of the total population you have to divide total deviation squared number
77720 by the total data set less one, so in this case 6 and take the square root of that number, by
doing this you get the deviation of 113.

A word of warning, if you use excel to calculate the standard deviation for you, as the newer
versions can do automatically, it makes the assumption that your data set is based on a sample of
the population and not the total population.

In terms of using this for business use if we calculated the sales numbers over a longer period we
could get and average forecast for sales and use the deviation number calculate maximum and
minimum projected sales, or to high light if anyone is over or under the target lines.

Next we will look at some of the other calculations we mentioned earlier and we will begin with
quartiles.

This measurement is useful to be able to see the area where the most numbers in a dataset full. It
does this by showing the lower (Q1) and upper (Q3) 25% of the dataset leaving Q2 (50%) the mid-

9
range for the dataset. This would be very useful for example with our above sales team if for
instance you needed to allocate a total bounces to them you would be able to determine who
would be able to get what percentage of the bonus. The basic way to calculate the quartiles you do
the following.

Take your date set and arrange it in order lowest to highest.

399 412 459 515 562 620 710

n=total number in the dataset, 7

Q1 (first 25%) is (n+1)/4= 8/4 = 2nd observation 412

Q2 (mid 50%) is (n+1)/2 = 8/2 = 4th observation (median) 515
Q3 (last 25%) is 3(n+1)/4 = 24/4 = 6th observation 620

The above calculation is on a small scale, but if you had a larger dataset this would be more
useful.

Next we will take a look at percentiles. And this is used to compare amounts with less or more than
a particular number. For example if you take a test and score 92%, this tells you how well you
scored on the test but it does not tell you how well you scored comparing to other people that took
the test, and this is where percentiles come in.

Percentiles are scores from 0 to 99 and they tell you the number of scores below a certain score. If
you had a percentile of 86 this would mean you scored higher than 86% of people that took the
test. Percentiles can be used for many business aspects including the percentile of a wage or
weights; it can be used to determine highest performers in a production environment so the
number of people producing units above 80% would get a bonus.

How is it calculated?

The first that we need to do is take all of the test scores and arrange them in ascending or
descending order as below

17 18 19 21 21 21 22 24 24 25 26 26 26 27 28 29 31 32 32 35

Next we need to use a formula to be able to calculate the 90th percentile. The formula is:

N= p/100 * n + 0.5

P is the percentile you want to find so in this case 80, n is the total number of values in the dataset.

The calculation looks like this:

80/100*20+0.5 = 16.5 so in this case, anything above the 17th number would get a bonus so 31
and above.

Another very useful calculation we can look at would the correlation coefficient. This represents the
correlation between two variables, or the interdependence of them, so how much is one reliant on
the other. This can range from -1 to +1, -1 indicating perfect negative correlation, +1 indicating
perfect positive correlation and 0 indicating no correlation.

This can be a good measure to determine for example the number of hours worked against the
number of units produced; is there any correlation between the two? From there you could then
look at number of units produced per hour against the running cost per hour; is there any
10
correlation between these figures? These can be useful in determining if it is cost effective to run
overtime. If there was a negative correlation in the units produced and the cost per hour, this could
be a good indication that either production is too low or running cost are too high. With this
information further investigation could be carried out to determine where the problems lay. There is
of course a formula to calculate this and the formula is:

We can now take one of the examples from above and calculate the units produced against the
hours worked to determine if there is any correlation between the two sets of data. The figures will
be taken over a one week period, and we will take the total number of hours worked in production.
We can take this as being a work force of 12 people working a standard 8 hour day.

The following table is the collected figures for the week outputs.

N X Y
hours worked units produced
Monday 102 72
Tuesday 96 68
Wednesd
ay 105 71
Thursday 73 64
Friday 82 63

From this data we have to make several calculations to find all of the values needed to be able to
calculate the final figure. The values are as follows:

1. Multiply each value of x with the corresponding value of y so you have 5 values xy, then
add up the totals.

N X Y
hours worked units produced xy
Mon 102 72 7344
Tue 96 68 6528
Wed 105 71 7455
Thu 73 64 4672
Fri 82 63 5166
total 31165

2. Add up the six values of x to get the total value then square this total. Follow the same
process for the values of y.

N X Y
hours worked units produced xy
Mon 102 72 7344
Tue 96 68 6528
Wed 105 71 7455
Thu 73 64 4672
Fri 82 63 5166
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 total 458 338 31165
total 209764 114244

3. Find the square of each value of x so you have 6 values x squared, and then add up these
values to get a total. Follow the same process for y.

N X Y
hours units
worked x produced y xy
1040
Mon 102 4 72 5184 7344
TUE 96 9216 68 4624 6528
1102
WED 105 5 71 5041 7455
THU 73 5329 64 4096 4672
FRI 82 6724 63 3969 5166
total 458 - 338 - 31165
426 229
total 209764 98 114244 14

Once you have these values you can now begin to calculate the correlation coefficient.

There are now few steps we need to take to find the final value.

(n x xy) (x x y) divided by (n x x - (x)) x (n x y - (y) )

(5 x 31165) (458 x 338) / (5 x 209764 42698) x (5 x 114244 22914)

155825 154804 / 1006122 * 548306

1021/ 551662729332 = 1021 / 742740 = 0.00

We can see from these results that these variables are uncorrelated.

This means that the number of hours worked does not represent a set number of units produced.

Armed with this information a production manager may want to carry out further investigations into
why there is no correlation and make the necessary changes to improve the outputs to have a
closer correlation to the number of hours worked.

Conclusion

In this assignment I have applied a range of techniques to analyse data effectively for business
purposes. I have been creating information that could be used for decision making by summarising
the data using representative values. I have demonstrated how using the results you can draw
valid and useful conclusions that can be used in a business context.
In addition to this I have been analysing data using measures of dispersion, and I have used this to
inform a given business scenario. Finally I have demonstrate how to calculate quartiles, percentiles
and correlation coefficients and shown how they can be used to draw useful conclusions in a
business context.

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Sources

Internet web sites:

http://en.wikipedia.org/wiki/Statistical_dispersion
http://www.brighton-webs.co.uk/statistics/dispersion.asp
http://financial-dictionary.thefreedictionary.com/Dispersion
http://en.wikipedia.org/wiki/Statistical_dispersion
http://iridl.ldeo.columbia.edu/dochelp/StatTutorial/Dispersion/
http://www.answers.com/topic/correlation-coefficient
http://www.thefreedictionary.com/correlation+coefficient

ASSIGNMENT Business decision making

Name: Michael Alan Smith

13
Address: Sluzska 780/36
Praha 8
Czech Republic

Post code / Zip: 182 00

Telephone No: 00420 608 52 11 96

Email Address: michaelalan.smith@yahoo.com

Date: 25-06-2011

Course Name: HNC

Tutor Name: Clive Findlay

Assignment Information in appropriate formats for decision making

Name:

Introduction

In this assignment I will be producing information in appropriate formats for decision making in an
organisational context. I will be using data from a given business scenario, and will prepare a
range of graphs using spreadsheets. This will include line, pie, bar charts and histograms and we
will draw valid conclusions based on the information derived. I will use trend lines in spreadsheet
graphs to assist in forecasting for specified business information and thus facilitate decision

14
making. Finally I will prepare a business presentation using suitable software and techniques to
disseminate information effectively and persuasively.

Business scenario

In the first part of this assignment I will demonstrate how the use of a different range of graphs can
help in the decision making process, also how different information can be demonstrated in
different types of graphs. Our business scenario will be a group of 5 shops selling DVDs in the
Southeast of England. We will show how the information gathered from all of the shops can be
shown by groups, individual shops and types of DVD sold, and we will also look at how trends can
be shown. Later this will be used to demonstrate how forecasting can be used to help make future
decision for a business.
.
To begin lets look at how some of the data that we will be using can be gathered. The first table
you can see (below) is the complete number of DVDs sold in each of the 5 shops over the period
of the 12 months of 2010.

Fe Ma Ma Au Se No De
Month Jan b r Apr y Jun Jul g p Oct v c totals
store
location
Basildon 295 112 90 92 87 70 68 68 73 75 119 389 1538
Southend 315 235 186 124 95 72 51 46 68 73 126 356 1747
Chelmsfor
d 262 115 96 69 54 52 43 35 38 49 84 294 1191
Brentwoo
d 149 105 84 62 51 43 32 26 32 46 59 93 782
Westclif 210 164 130 95 83 72 56 42 38 59 83 198 1230
6488
From the table we can see a lot of data but its not that easy to read this, so to make this simpler to
read and be able to make simple clear comparison between each of the shops total sales we can
put this in to a simple bar chart graph such as the one below.

In itself this data is a very high level overview of the sales from last year and as such may be to
general to make any real decisions that may be good for the business. However we can get some
indication as to what is happening and where we may want to direct some attention, for instance
we can see that all of the shops have a reduction in sale during the summer months, however, the
Brentwood store is showing very low numbers even during the peak months of January and
15
December, so this would want further investigation into the reason behind it. Some of these
reasons could be the store location, is the store in a primary location or is it off the main high street
where it may not get much passing trade? Does the area have an aging population that simple are
no longer interested in DVD films, is the shop running good promotions on the current block buster
movies, is the shop carrying the right type of movies for its customers?

Something else we can look at this higher level would be the annual trend, the year on year sales.

From this data we can see that all of the shops are showing a downward trend in sales every year.
In particular we can notice this in the Brentwood store.

Another very useful way to look at the sale for each shop would be to look at the type of DVD that
is being sold; a very visual way to do this could be with the help of pie charts. A pie chart is a very
effective way to show the percentage, the relative size of the number if items that is part of the
overall item. This information in terms of our DVD sales would help to decide what types of DVD
should be stocked in what shop and the best types of promotion that can by run. For example if we
look at the below pie chart for the Southend shop we can see that there are 5 general categories of
DVD being sold, these are horror, action, romance, comedy and drama. The first example we will
look at will be for the full years sales.

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Showing the details in a pie chart is a very clear way of viewing this issue, we can show the
percentage of each of the categories of DVD that has been sold, and clearly action is out selling all
others with 41% of total sales; whilst drama is coming last with only 7% of the total sales. This
information is again useful at a more strategic level and to gain an overview of the total business.
To use this information for better decision making we would need to again break it down to the
individual shops.

As an example we will look at the Brentwood shop, as we already know the sales are very low
overall and by using the pie charts we can see at what percentage each of the categories make up
the total sales number.

Interestingly here we can see that action is again making up the biggest portion of sales, but
romance is only 1 % less, with 28% of the sales in this section. So of the total sales of romance the
Brentwood shop is making up a total of 28% of these.

Now if we take this and look at where they stand overall, we can see that they make up the biggest
portion of sales in this category with 25% of the total sales.

17
This type of break down of data and analysis can be done for all of the shops and all of the
catorgories and from there we can make the types of decisions such as what films to promote
more in what areas, and we can also begin to get a better picture of the people that are buying the
DVDs from the company.

We must remember that these figures are taken from the total sales for 2010, in reality we would
break these down even more in to daily or monthly sales number and run the analysis on them.
With this you could then begin to make up a forecast plan for the following year, for example in
January/February 2011 you would want to make sure you were running high visible point of sale in
the Brentwood store for new romantic films.

Another useful way to look at data is with the use of the line graph. Lines can be useful to track
changes over a period of time. One important thing to remember with a line graph is that the
variable that is plotted on the X axes is in equal increments, for us it will be in months, however if
this is not the case an X,Y scatter graph would be better to use. Line graphs do not have to start at
zero, and we will show this in the example below.

In our example we will track the sales of single category of DVD over the period of one year. If we
take the category of romance we can see that we have had a total of 873 sales over the period of
one year, now if we add this data to a line graph we can see how these sales were made up.

As we can see from the above, the sale peak in February drops sharply in March, flat line
throughout the year and again take a sharp rise in November and December. Using this data we
can begin to think about stock levels and we can see that we want to have large stocks of romantic
DVDs in for the months of January and February, carry less stock for the rest of the year but again
increase it for November and December.

Now if we run this analysis for of the categories we would be able to determine what stocks to
carry for the whole range and then if we do the same for the shops to determine their sales trends
for each of the categories we would be able to decide what amounts of stock to carry, how that
stock should be distributed throughout the company and when.

Another useful graph similar to the line graph is the scatter graph. The scatter graph allows you to
investigate links between 2 sets of variables, to confirm if there is any correlation between them.
So the idea is to plot the points on the graph and if there is a random pattern we would say there is
no correlation between the data. If there is a lose gathering of points we would know there is a
weak correlation and if the points form an almost straight line we would say there is a strong
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correlation between them. For our business scenario there is not much use for the correlation as
we are only selling one product and we would need to gather more data for example the gender of
the person buying the a particular type of DVD, so do we see a correlation between men buying
action movies.

However we can use the scatter graph in a useful way if we add a forecast trend line to the data
plotted, as you can see from the example below for the total sales year on year, we can see the
forecast trend is in a downward direction. So based on historical data we can see that in the year
2011 we are set to sell a total of around 5000 DVDs.

By simple adding the trend line to the scatter graph we can begin to make decision as to where the
business is going, is 5000 DVDs enough to make a profit, will the number of sales be enough to
even sustain the business in the coming years. Or should the business start to branch out into
other areas such as selling computer games. Again we could run this style of analysis on each
individual shop to see if there is any upward trend over the coming years. Forecasting trend lines
can be very useful in helping to set sales targets for each of the shops to try to help the forecast to
increase.

Business presentation

For the final part of this assignment I will be putting together a business presentation on the above
scenario. This will include the use of the graphs that have been demonstrated above, and will show
actions and decision that should be taken.

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20
Conclusion

During this assignment we have demonstrated how producing information in appropriate formats
can help with the decision making that needs to take place in all organisations.

To do this I used data from a given business scenario, annual sales from Mikes DVDs and
prepared a range of graphs using spreadsheets. These included line, pie, bar charts and
histograms and based on the results of these graphs draw valid conclusions. I demonstrated the
use of trend lines in spreadsheet graphs to assist in forecasting for specified business information
and informed decision making. Finally I prepared a business presentation using Microsoft power
point to disseminate information effectively and persuasively.

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ASSIGNMENT 4

Name: Michael Alan Smith

Address: Sluzska 780/36

Praha 8
Czech Republic

Post code / Zip: 182 00

Telephone No: 00420 608 52 11 96

Email Address: michaelalan.smith@yahoo.com

Date: 03/07/2011

Course Name: HNC

Tutor Name: Clive Findlay

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Assignment Information plan
Name:

Introduction

In this assignment I will look at the use of information to make decisions at not only operational but
also tactical and strategic levels in an organisation. In doing this I will be reviewing management
information systems (MIS) and suggesting appropriate information processing tools for operational,
tactical and strategic levels of the organisation. I will also review and evaluate inventory control
systems in an organisation.

I will prepare a spreadsheet to enable material requirements planning and demonstrate how to
calculate the economic order quantity (EOQ). Finally I will prepare a project plan for an activity and
determine the critical path, use financial tools such as discounted cash flow and internal rate of
return (IRR function) to evaluate the financial viability of the proposed investment.

Management information systems (MIS)

What is a management information system (MIS)? According to Terry Lucey ; management

information systems (1991):

Management Information System (MIS) is a system turning data into information. It turns
data from internal and external sources (external because the organisation interacts with the
environment around it) and using the system set up becomes usable information in an
appropriate form for use by managers.

Any organisation, no matter how big or small, needs information of different types, these are
commonly categorised as:

Planning
Controlling
Recording transactions
Performance measurements

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 Decision making

Along with the information we need to have some way of processing this information to be useful
for decision making purposes and this is where the different types of management information
systems can be used, and at different levels of the organisation, such as operational, tactical and
strategic.

Lets begin by looking at the strategic level of the organisation.

At this level we find the senior manager the CEO the FEO and the senior directors, and there main
function within any organisation is to give the strategic plan, the direction the company is going,
how long it will take to get there. They will make changes to the organisation to better fit with the
current environment it operates in.

To help in doing this they would use MIS general know as Executive support system (ESS) or
executive information system (EIS). The ESS will take information from both internal MIS and
external systems.

From internal MIS it will take critical information on finance, supply chain information,
manufacturing outputs, current trends within the organisation, it will take information from all of the
systems being used within an organisation. These can include systems such as enterprise
resources planning (ERP), from data warehouses, and the ESS generally has very good reporting
and drill down capabilities.

It will also take information from external sources such as the stock markets and share prices, it
will look at its competitors and analyse what they are doing. Depending on the organisation it will
be looking at political situation throughout the world more. Shipping lines for example may have to
look at and analyse the potential issues of piracy in parts of the world and make decision on how
best to deal with going into those waters where the greatest risks are.

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But at the strategic level all of these systems used will only provide summary information, the
decision making process still relies heavily on human judgment, as strategic long term plans
cannot be programmed and the global environment changes constantly.

Next we will look at the tactical level of an organisation and the system used there.

At the tactical level we find the organisation middle management, and here we find the monitoring
and control functions.

The MIS would normally interact with the same systems as used at the operational levels. The
information at this level could be actual value versus budget on organisational cost or project work;
it can be actual output versus estimated output. At this level the type of MIS used would be called
the decision support system (DSS), the DSS combines data with analytical models to support the
semi structured or none structured decision making, the what if analysis. They normally have a
greater analytical power than other systems allowing them to gather larger amounts of data and
analyse it quickly and give it in a form that will help managers make decisions.

The role of the DSS is not to actually make the decision but to support the managers by giving
them the ability to look at a number of alternative options and evaluate them before implementing
them.

Finally we will look at the MIS at an operational level.

And at these levels operational managers are to track the day to day operational activities. The
operation decision are general on a much smaller scale but can include things such block a sale
due to credit limits, tracking daily transactions and monitoring production outputs.

At this level we can find a variety of systems that can be used, these can include office automation
system (AOS) and these are simple computer systems that most of us use every day. They can
include word process and desk top publishing, E mail, intranets, excel spread sheets. There is also
included transaction processing system (TPS) and these are used where a transaction has to take
place for the operation to be able to continue.

Whilst I cannot give example of information used in my own industry due to the confidential nature
of aerospace, however, on a day to day base both AOS and TPS are used in the office. In SAP we
use TPS to automatically create deliveries on orders where goods are available allowing the next
stage of the operation to take place. Used more interactively is the AOS and we use these systems
to create reports on operational key performance indicators (KPI), excel spread sheets are created
daily, power point presentations are created, and hundreds of E mails are sent.

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So as we can see every aspect of an organisation uses MIS all the way from human resources to
the top executives; the biggest differences are how the different levels of an organisation interact
with the MIS being used, from operational using their MIS for task orientated controlling system
and at a strategic level using it more for information gathering purposes to assist in decision
making but not actually making the decision.

Stock (inventory) control systems

In this section we will be reviewing stock control systems that are used with organisation, and also
understanding why stocks are held.

Almost all organisation hold stock or inventory, even all of us do the same, how many of us dont
have food stock in the cupboards? There are many reasons why organisations carry stock, could
you imagine an office that did not carry a stock of printer paper?

Some of the reasons are:

Are to ensure goods are available when demand comes

To meet future shortages
To get discounts on bulk purchasing
Even as deliberate investment policy

There are, however, some things that need to think about when holding stock. For example holding
cost, the more stock you hold the bigger the storage facility need and the greater the cost,
insurance cost, obsolescence cost; if you carry to much stock you run the risk of having
obsolescence, and linked to this would be destruction cost. There is the cost of obtaining the stock,
organisation run the risk of investing to much into stocks and not having enough cash flow to
maintain the business and pay the bills. If you are not carrying enough stock, you have a risk of
stock out and production stopping or customers cancelling orders.

And here is where the stock control systems come in. Control systems will analyse past stock
usage, it can also determine future demand by looking at open orders in the systems. Based on
this information it can determine what the minimum or maximum stock levels should be, it can
suggest when to reorder and reorder quantities.

Some examples of simple stock control systems would be demand reorder timing, perpetual
inventory and periodic review. If we begin with demand reordering the basic principal is for each
store item details about usage in an average period an exceptionally high and exceptional low
usage period are gathered. Supply lead time would be analysed in the same way longest, shortest
and average. Using this information it is possible to calculate a level of stock that will indicate when
a new purchase should be made, and this is a good method to use for low value high usage items.

The calculation looks like this:

Maximum delivery period X maximum usage

One of the draw backs can be that this method will tell you when to order but not how much to
order. There are mathematical ways to determine this but these can be over elaborate with low
value stocks, in these cases it is normal for management to decide on a suitable stock level.

Another example is that of perpetual inventory, and this is based on continues stock taking. The
method involves knowing the current stock levels of item of stock at any time. This means keeping
records of receipts issues and balances, and as clerical errors could occur continues stock taking
is needed to check and confirm the records. This involves taking a number of items and counting
and checking them daily, and at least once a year running a full stock take.
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The last method is periodic review. And as the name would indicate this method involves physically
counting and valuing every stock item at set points in time, usually at the end of a financial period.

This method does have some disadvantages over continues stock taking. Some of the advantages
with the continuous method can be:

Annual stock taking can cause a lot of disruption to the operations

Discrepancies and losses may not be found until the stock count happens and this could be
only once a year.
Control levels are improved, with less likelihood of over or under stocking
More time is available, reducing errors
Production hold ups can be reduced due to stores staff not being available

Material requirements planning (MRP)

In this section we will see an example of how a simple Microsoft excel spread sheet can be used to
enable material requirements planning (MRP).

Spread sheets arent true databases; they do, however, have similar features in terms of
manipulating tables of data but to a lesser extent than that of a true database. For smaller
organisations it can be a simpler option. The idea of the databases is to store all information in one
place so multiple departments can access it. It also helps to eliminate errors with entering the
same information into different systems, so a customer details can be entered once and populated
for departments.

In the example I will also demonstrate how the calculation for economic order quantities would be
shown. This is the most economical quantity that should be order to minimise cost. This model
does make some assumptions and they are:

1. Demand is certain and continues over time

2. Supply lead time is constant and certain
3. Customers order cannot be held whilst fresh stocks are awaited
4. No stock outs
5. All prices are constant no bulk purchase discounts
6. The cost of hold stock is prepositional to the quantity of stock held

The formula for the economic order quantiy (EOQ) looks like this:

An example might be:

The demand for a commodity is 10,000 units per year the cost of placing an order is 25 pounds
and it cost 16 pence to hold one unit per year. The calculation would look like this:

2X25X10,000 /0.16

So the EOQ for this example would be 1767 per order.

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 Annu
Minim Annu Cost al Lead
OH Mont um On al per stora time
Compon stoc hly stock ord usag orde ge EO Suppli (wee
ent k usage level er e r cost Q er ks)
141 141
spring 1 200 500 250 4 6000 20 12 4 A 2
195
spring 2 255 499 166 0 5984 32 10 7 B 3
117
spring 3 899 457 228 0 5482 20 16 1 A 2
126
spring 4 458 582 145 0 6983 15 13 9 D 4
138
washer 1 687 397 397 0 4759 20 10 0 C 1
washer 2 123 304 152 986 3645 20 15 986 C 2
136 136
washer 3 239 721 240 2 8653 15 14 2 D 3
washer 4 365 104 17 0 1248 15 40 306 D 6
screw 1 632 821 164 0 9856 20 56 839 A 5
screw 2 412 400 200 0 4798 20 21 956 A 2
screw 3 150 197 197 810 2359 32 23 810 B 1

In the example of the planning spreadsheet, we can see several useful pieces of information. We
can see the current on hand stock, the monthly usage, it also shows us a minimum stock level, and
this is calculated using the method of demand reordering where we take the monthly usage and
multiple it by the lead time. We can also see the EOQ, and in the Colum On order we can see the
EOQ for the items of on hand stock that are currently below the minimum stock levels.

Project plan

In the final section of this assignment I will be briefly looking at project planning and how we
determine the critical path and some of the financial tools used when determining if a project is in
fact viable such as discounted cash flow and internal rates of return.

Project planning and critical path analysis may sound very complicated, but it is basically logic. A
project plan is a simple way of breaking down a large project into its component parts and list what
needs to be done and in what order. The critical path analysis is defined as the path through this
network or list with the greatest duration.

On all projects there are activities that can not start until the previous activity is completed, and
every activity has a maximum length of time it will take to complete it. There are some activities of
course that can run in parallel with others. The way the critical path is found is by determining the
longest length of time for any of the interconnecting activities.

To give an example of this lets look at a simple activity of a company wanting to run some market
research before they create a new sales strategy. Firstly lets review the list all of the activities they
will need to do:

Task description order/logic time in weeks

A Plan primary research to be completed first 1
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B Prepare mail shot start when A is complete 3
C Prepare questionnaire start when A is complete 2
D Send and wait for mail shot replies Start when B is complete 3
E Issue questionnaire Start when C is complete 3
F Complete and analyse results Start when D and E is complete 2
G Plan selling campaign Start when D, E, and F are complete 2

Once we have the list completed we can transfer this to a network diagram.

Each of the circles or nodes represents a task (the numbers are only to help follow the diagram).
The letter above each of the lines is one of the tasks; the number below the line is the number of
weeks each task will take to complete. We can see from this that tasks B and C can both start at
the same time as they are not reliant on each other. From the diagram we can look at both of the
paths and calculate which of them the critical one is.

Path way number:

1. A, C, E, F, G has a total time of 9 weeks

2. A, B, D, F, G has a total time of 10 weeks

Pathway number 2 in this example would be the critical path as it has the longer total finish time.

Another important aspect of projects is their financial viability, in other words is it worth an
organisation investing its money in to a project? There are of course some financial tools that can
be used to help determine this and we are going to look at 2 of them here; firstly it will be
discounted cash flow followed by internal rates of return (IRR).

Discounted cash flow (DCF)

This approach is in finance a way of valuing a project, a company or an asset. Here we are going
to be using it for projects. DCF does this by using what is known as the time value of money. All
future cash flows are estimated and discounted to give their present value. The sum of all future
cash flows, both incoming and outgoing, is the net present value (NPV) and this is the first
calculation we are going to look at.

When calculating the net present value we can tell if a project will be profitable or not by comparing
the returns on the project to investing the money elsewhere.

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For example a company can invest 3000 in a project now that is showing a return of 500 in the
first year and 750 in the second. The company could invest elsewhere and get a return of 5% on
its investments. So how much would the company need to invest now to get the returns of 500 in
the first year and 750 in the second?

Year cash flow discount factor present value

5%
1 500 1/1.05 = 0.95 475
2 750 1/ (1.05) =0 .90 675
1150
We now know that the company would need to invest 1150 elsewhere at 5% to get the cash
flows. The question is now is it cheaper to invest in the project by 1150, and does the project offer
a return of over 5% per annum?

The NPV statement would look like this:

Year Cash flow discount factor present value

5%
0 (3000) 1.000 (3000)
1 500 1/1.05 = 0.95 475
2 750 1/(1.05) =0 .90 675
-1850

In this case we can see it would clearly more beneficial for the company not to invest in the project
as the NVP is showing a negative number.

Internal rate of return (IRR)

The second tool we are going to look at is the internal rate of return (IRR). The IRR is a method
that is used to determine the rate of interest; it will give an indication if a project is viable the IRR
exceeds a minimum rate of return. For example if 300 is invested today and in one years time is
worth 320 the IRR (r) is calculated as follows:

PV of cost = PV of benefit
300 = 320/(1+r)
300(1+r) = 320

1+r = 320/300 = 1.06

R = 0.06 = 6%

So the IRR on our investment of 300 would be 6%. The above example is based on a 1 year
investment; the principle is the same if the project runs over a longer period of time. Here you have
to find the NPV for each of the years. A rough guide to do this, 2 thirds X (profit/ cost of the project).

For example if we had a project with an investment of 500, with a return of 200 in year 1, 250 in
year 2 and 300 in year 3 the IRR would be calculated as follows:

0.66* (200+250+300-500)/500 = 33%.

One thing we have to remember when using any of these calculations to determine if a project
would be a good investment is that the returns are only estimated. In our example about where we
are showing an IRR of 33% you would need to use your judgment to decide if this was going to the
actual return on your investment.

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Conclusion

In this assignment I have looked at the use of information to make decisions at the operational,
tactical and strategic levels in an organisation.

To do this I reviewed management information systems (MIS) and demonstrated appropriate

information processing tools for operational, tactical and strategic levels of the organisation. I have
also reviewed and evaluate inventory control systems in an organisation. I have prepared a
spreadsheet to enable material requirements planning and demonstrate how to calculate the
economic order quantity (EOQ).
Finally I have prepared a project plan for an activity and determined the critical path. And I have
demonstrated the use of financial tools such as discounted cash flow and internal rate of return
(IRR function) to evaluate the financial viability of the proposed investment.

Sources

Web sites:

http://www.change.freeuk.com/learning/business/mis.html
http://en.wikipedia.org/wiki/Management_information_system
http://www.webopedia.com/TERM/M/MIS.html
http://www.businessdictionary.com/definition/management-information-system-
MIS.html
http://en.wikipedia.org/wiki/Management_information_system#Types_of_Information_M
anagement_Systems
http://www.ehow.com/about_5194585_types-management-information-systems.html
http://www.fao.org/docrep/W5830E/w5830e0k.htm
http://mc-mis.wetpaint.com/page/Different+Types+of+Management+Info+Systems
http://www.businesslink.gov.uk/bdotg/action/detail?
itemId=1073792661&type=RESOURCES
http://en.wikipedia.org/wiki/Inventory_control_system
http://inventorycontrol.org.uk/inventorycontrolsystem/
http://communication.howstuffworks.com/how-inventory-management-systems-
work.htm
http://www.businessballs.com/project.htm
http://www.bizhelp24.com/small-business/critical-path-analysis.html

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