Business and Management Higher Level Internal Assessment
Should Nithya Hypermarket, a grocery store, launch a subscription service to increase its profitability?
Intended For: Nithya Hypermarket
Session: May 2018
Word Count: Research Proposal: 497 words Executive Summary- 197 Written Report- 1793
Research Question- Should Nithya Hypermarket, a grocery store, launch a subscription service to increase its profits?
Proposed Methodology ●! Rationale Nithya Hypermarket is a grocery store located in Kerala, India and is a sole proprietorship business. Nithya offers a variety of common goods found at a grocery store. Currently, Nithya faces a lot of competition from other supermarkets such as Cherukara and Sulabha, and needs to differentiate from rivals. I will be researching whether the introduction of the newsletter subscription service will increase the profits earned by Nithya. This research will benefit Nithya as they conclude logically and reasoned as to if a newsletter subscription service will work towards earning more profits.
●! Areas of Syllabus to be Covered Unit 1.7- Organizational Planning Tools !! Decision Tree and Force Field Analysis Unit 3.6- Efficiency Ratio Analysis !! Profitability Ratios
●! Possible sources of information Primary Research!! Interview with Mr. Joseph Cherian (owner) to gain insider and detailed financial information. !! Survey with employees to capture their opinions. !! Survey with customers to evaluate effectiveness of digital marketing.
Secondary Research!! Subscription Service Website to find costs of service.
●! Organizations and Individuals to be approached !! Organization- Nithya Hypermarket !! Individuals- Mr. Joseph Cherian (owner)
●! Methods used to collect and analyze data, and the reasons for choosing them !! Force field analysis (Unit 1.7)- to conclude if the proposed change is worth implementing by weighing the restraining and driving forces.
!! Decision Tree (Unit 1.7)- analyzes the outcomes of the decision and hence, helps to come to a justified decision based on the probability of a subscription service providing higher profits !! Profitability Ratios (Unit 3.6)- to find percentage increase in net profit margin.
●! Order of Activities and Timescale of Project Activities
Conducting Primary Research
June 5th to 13th
Begin Written Report
Begin Final Draft
Anticipated Difficulties ●! There may be a language barrier, but I will get a translator to translate anything that can’t be understood and the correct and coherent translation of the English questions into the locally spoken language beforehand betters the approach as the questions will be hard to comprehend for people who are not fluent in the English language. ●! Getting unbiased answers from local customers will be difficult, but this will be prevented by keeping the customers’ identity strictly confidential.
Action Plan June 2-4 Identify Problem Discussion with Teacher Contact organization Discuss areas of concern with owner Topic Selection Conclude Methodology Primary Research Design Owner Interview Conduct owner interview Design Customer and Employee Survey Conduct customer and employee surveys Secondary Research Subscription Service Website Analysis Interpret and analyze data Written Report Conclude effects of subscription service First Draft Feedback with teacher Revise draft Final Submission
Word Count- 491
2017 June June June 11-13 14-20 21-30
Should Nithya Hypermarket a grocery store, launch a subscription service to increase its profits?
Intended For: Nithya Hypermarket
Subject: Business and Management Higher Level Internal Assessment
Session: May 2018
Word Count: Executive Summary- 198 Written Report- 1793
Acknowledgement I would like to thank Mr. Joseph Cherian for providing me with the information needed and for allowing me to survey employees and customers. I would also like to thank my business and management supervisor for helping me throughout the assessment.
1.1#BUSINESS#BACKGROUND# 1.2#PRESENT#SITUATION####### 1.3#NEED#FOR#ANALYSIS#### #
4# 4# 4#
2.1#SOURCES# 2.2#TOOLS# 2.3#DATA#VALIDITY# 2.4#LIMITATIONS#OF#APPROACH#
5# 5# 6# 6#
4.1#FORCE#FIELD#ANALYSIS# 4.2#PROFITABILITY#RATIO# 4.3#DECISION#TREE#
18# 20# 21#
Executive Summary The research question is “Should Nithya Hypermarket, a grocery store, launch a subscription service to increase profits?” This report aims to research whether the introduction of subscription service will increase profits.
Nithya lacks a loyal customer base due to risen competition, and therefore less profit. The scope of the investigation was assessed through Force Field Analysis, Ratio Analysis and Decision Tree, and the tools were used with the primary research of an interview with the owner as well as surveys with the customers and employees. The secondary data used provided information about subscription service costs.
As concluded by the tools used, Nithya Hypermarket should adopt a subscription service as it has a greater probability of generating profit, increases profits by 1.25 %, and the driving forces of implementing a subscription service outweighs the restraining forces weight of not implementing it. It is recommended for the organization to use GetResponse newsletter service as it was the one used in the research, it would be most appropriate for the business circumstance and easy to use. The addition of observations into the primary data validates data furthermore.
Word Count: 198
1.! Introduction 1.1!Business Background Nithya Hypermarket is a sole proprietorship business in Kerala, running since 2000. It is located in the center of a populous town (Cherian). Nithya specializes in selling great quality fresh produce, essential groceries & daily merchandise (nithyahypermarket.com)
1.2!Present Situation Nithya faces competition from similar rival stores such as Sulabha and Elite because, according to the owner, many customers have patronized these stores because they are aware of the sales and promotions (Cherian). Nithya is losing customers, which is leading to less profit.
1.3!Need for Analysis A newsletter service is a service where customers sign up and are alerted of promotions, coupons or sales occurring in the store via an electronic device; none of Nithya’s competitors have a newsletter subscription service. The need to investigate this proposal is due to the possibility of concluding whether or not the launch of a subscription service will solve Nithya’s problem of less profits due to customers not being aware, by making customers more aware of Nithya’s promotions and sales.
Therefore, this research aims to answer the question, “Should Nithya Hypermarket, a grocery store, launch a subscription service to increase its profits?”
2.! Methodology Employed 2.1 Sources Primary Sources!! A structured interview with the owner because he provided evidenced opinions, a numerical value of probability of a likelihood of the newsletter service providing profits, and financial estimates. !! A survey from the employees as it captures their opinion; they are the ones who will communicate with customers of the newsletter service. !! A survey for 50 customers was taken to comprehend their perception of a subscription service and how effective it will be. Secondary Source!! Secondary Data includes the “GetResponse” website, which provides information about the costs of the newsletter subscription service.
2.2!Tools The research was analyzed using the Force Field Analysis, which analyzed the driving and restraining forces for and against executing a newsletter service; Ratio Analysis analyzed a possible increase in profitability; and Decision Tree calculated the expected value of not implementing a subscription and implementing it, and therefore helped to conclude the best option.
2.3!Data validity The data gathered was validated because the actual employees, customers and the owner were approached for interview/surveys. The employees and customers approached expressed honest opinions because their responses were kept confidential.
information gathered from employees, such as the amount of people entering the store, was cross checked with the owner.
2.4!Limitations of the approach Only 50 customers were surveyed out of the many who visit the store. The customers represented in the findings are only just a part of the total customers visiting the store. Furthermore, there may have been room for bias from the interview conducted with the owner.
3! Main Results and Findings 3.1.1! Primary data Information from interview with owner !! What do you think are the potential advantages and disadvantages of adopting a new way of marketing? - We will stand out from the other super markets, and therefore customers will remember us. Alerts of promotions or sales brings awareness to what we have to offer. The negative will definitely be the cost of setting up and installing the technical equipment and teaching employees to communicate efficiently with the customers in a short period of time. Also, our store caters to a lot of older people who aren’t capable of using electronic devices. !! What do you think is the probability that the subscription service will increase the profit, and increase the profit by what rate? I think the profit will increase by 15%, and there will be a 60% likely chance that we will unveil a subscription service. !! Can you please provide a numerical value for the following? Monthly amount of people in store
6000 (200 daily)
Average price spent by customer
!! What costs do you presume are going to be there which associates with the adoption of a newsletter subscription service? The expenses associated would be the set up costs involved to get it running on the website. This would amount to 15,000 rupees. Very minimal in-house training would be required.
3.1.2 Surveys o! Survey with Employees
What+is+the+average+amount+of+time+that+you+spend+with+the+ customer+at+checkout? 8%
Figure a 25% of employees spent 3-4 minutes at with customers and 67% of employees spend 4-5 minutes with customers at checkout, which is proper time to communicate with customers. o! Survey with customers
Figure b 92% of customers have access to an electronic device with internet connection, which is essential for digital marketing.
Figure c 82% of customers check their electronic devices at least one to two times to check their email which is how the newsletter service is going to carried out.
Figure d 82% of customers were comfortable with sharing their information as they gave at least a “6” as the rating.
Does+the+idea+of+getting+emails+of+newsletters+containing+ promotions,+sales+or+coupons+encourage+you+to+come+to+this+ store+often?
Figure e 60% of customers agree that the installation of a newsletter service encourages them to come back.
Interpretation of Raw Data
-! Out of the 6000 customers that come monthly (approximately 72,000 people yearly), 3600 will come back (which means 43,2000 will come back yearly) because 60% (according to customer survey) of customers will come back once notified of the service. -! Average spent by each customer: 800 rupees -! 43,200 customers*800= 34,560,000 (expected increase in revenue after subscription service launch) -! Current yearly revenue (5,76,08,982.00) plus the 34,560,000 revenue made with the subscription service means that the total expected revenue is 92,160,000 yearly. -! 88% of revenue (Cherian), goes into the cost of goods sold -! Expected Revenue (92,160,000) * .88= 81,100,800 (cost of goods sold)" 92,160,0008,11,00,800=1,10,59,200 -! 1,10,59,200- (Expenses + Costs of Subscription Service and Set Up)= 74,83,512
3.2 Secondary Data Digital Marketing3.2.1. Costs of Newsletter Service: The cost of the subscription service is 16,000 rupees monthly. (getresponse.com)
4.! Analysis and Discussion 4.1. Tool 1: Force Field Analysis- used to assess the driving forces for the change of introducing a newsletter subscription service and restraining forces against it (Hoang, pg 102) Driving Forces
Provides Competition Increased Customer Awareness of store Sufficient Time to communicate with customers of service
Costs of digital marketing: 16,000 monthly
Change: Launch of Subscription Service
Not all customers proficient in technology
Customers comfortable with sharing information Customers check email at least 3-4 times a day Total: 16
Force Field Analysis helps to assess forces for and against the change of installing a newsletter service (Hoang, pg 102). The average cost of 16,000 rupees monthly for the newsletter service is a restraining force as it adds to the expenses, and therefore gets a weightage of 5 (getresponse.com). Also, not all customers are proficient with technology, and this is a negative implication as Digital Marketing is efficient for those who are capable of using technology (Cherian). This reason has a weightage of only 2, while not all customers are proficient, most are. As for the driving forces, there is increased competition which has a weightage of 5 because Nithya implementing a subscription service is unlike its rivals and makes them stand out. Also, customers will become aware of what the store has to offer; according to the customer survey, 30/50, or 60% of customers will come back again if there was digital marketing (Customer Survey); the weightage is 5 because customers becoming more aware eventually leads to a higher customer base, and therefore higher profit. The driving force of sufficient communication will allow employees to communicate of the service (Employee Survey); the weightage is one because it is a convenience for employees to communicate. Also, 86% customers trust Nithya and will share their personal information (Customer Survey); the weightage is 2 because in a world with technological mishaps, Nithya has gained trust. Lastly, according to the customer survey, at least 82% customers check their emails at least 1-2 times a day; this means that most customers will see the notifications sent by the store; the weightage of 3 was given because customers will definitely see and constantly be reminded of Nithya. The weightage of the restraining forces is 7 while the driving forces weighed 16. As concluded by the Force Field Analysis, the driving forces outweigh the restraining forces, and therefore, the installation of a service is doable. A weaknesses of the Force Field Analysis include the rather subjective nature in allocating weightages to different driving and restraining forces.
4.2. Tool 2: Ratio Analysis (Net Profit Margin)- used to find the profit margin before and after the installation of a subscription service, and find if there is an increase /decrease in the profit margin (Hoang, pg 274).
Profitability Ratio Analysis Net Profit Before Newsletter Service Ratio- Net Profit Margin
+,-./0123-.4,210,.56-,0,7-.869.-8: .×100%. ;8,6?,. 35,39,390.0000 .×100. = 6.87%. .5,76,08,982.00
Net Profit after Newsletter Service +,-./0123-.4,210,.56-,0,7-.869.-8: .×100%.. ;8,6?,. 74,83,512 ×100% = 8.12%. 9,21,60,000
Ratio Analysis will help to answer whether the installation of the newsletter helps to increase profit (Hoang, pg 274). According to the ratio analysis, the net profit with the subscription service will increase by 1.25%, and therefore, there is an increase in profit. The expected revenue was calculated through the survey from the customers as well as the interview from the owner. The limitations in this method include the predicted values as customer data was used; the calculations were based off the 30/50 customers who will come back if there was subscription service. Respondents may have not given honest feedback, and/or, not provide an answer that puts them on the unfavorable side; this results in data that is less accurate.
4.3.Tool 3: Decision Tree- analyzes the outcomes of the decision and hence, helps to come to a justified decision
Profit increases (0.6) 40,70,298.5
Launch a subscription service
Profit unchanged (0.4) 35,39,390 Do nothing
35, 39,390 The two decisions that are being analyzed is to launch a subscription service or to keep everything the way it is currently. If a subscription service is introduced, the profit will increase by 15% (Cherian); from the current profit of 35,39,390, the profit increases to become 40,70,298.5. There is a 60% of probability of this happening, with the value being 24,42,179.1 (40,70,298.5*0.6). There is a 40% of probability of profit being unchanged, with the value being 14,15,756 (35,39,390 *0.4). These expected values add up to be (40,70,298.5*0.6) + (35,39,390*0.4) = 38,57,935.1. This is higher than the 35,39,390 rupees’ profit expected if Nithya doesn’t launch a subscription service. Hence, launching a subscription service is favorable. The weaknesses of this tool include the possibly subjective probability behind it; the probability is estimated by the owner and is prone to opinion rather than fact, and therefore the accuracy of the tool is lessened.
5.! Conclusion Nithya Hypermarket should launch a subscription service to increase their profits. According to Force Field Analysis, they should launch the subscription service because the weightage of 16 for the driving forces (such as increased competition and increased customer awareness) are greater than the weightage of 7 for restraining forces (such as costs of digital marketing). With regards to the ratio analysis, the newsletter subscription service should be introduced because the profitability is increased by 1.25%. Lastly, according to Decision Tree, the expected value of launching the subscription service is higher than the expected value of not launching the service, and therefore, launching the subscription service is favorable. There are various limitations to this approach: only 50 customers were surveyed amongst the many thousands of customers, and the tools are approximate, based on opinions and current sales. To add on to the primary research, there should be an observation conducted at the store (to see how many people visit daily and the amount each customer spends during checkout) to furthermore validate information provided. Areas of further study include conducting the PEST Analysis as it is putting to use the external environment in relation to the condition of the business to furthermore evaluate the political, economical, social and technological implications in implementing a newsletter subscription service.
6.! Recommendations Nithya is recommended to use the GetResponse newsletter subscription service as it was used for this investigation, and can be easily appropriated by Nithya as opposed to other newsletter services. There is a cost of recommendation however; the subscription service should not take away from current promotional methods (such as billboard advertising), but rather be an addition to these.
Bibliography Candidate. “Cusomer Survey” Survey. June 12, 2017 Candidate. “Employee Survey” Survey. June 11, 2017 Cherian, Joseph. Personal Interview. June 5, 2017 GetResponse. “Pricing Options.” GetResponse Email Marketing, secure.getresponse.com/pricing/en?_ga=2.215200341.333956869.1509377480601449314.1509377479. Hoang, Paul. Business Management. 3rd ed., IBID Press, 2014. “Home Market - Responsive HTML5 Theme.” Nithyahypermarket, www.nithyahypermarket.com/.
Appendices Interview with owner 1.! Hello, what is your name? Hello, my name is Joseph Cherian. 2.! What does your business do, where is it located and when did you begin? We are a grocery store located in Kerala, and we mainly sell food items. I started this business in 2000. 3.! What are some problems faced by the business? We have a lot of competition nearby and so therefore customers go them. In the recent years, the profits have been going down due to the fact that customers may be more aware of what other stores have to offer. 4.! How do you think a subscription service will affect the customer service? In today’s world, more and more people are converting to the use of technology. I think taking advantage of this change will be for the betterment of the business because a subscription service will help customers remember Nithya Hypermarket. 5.! What do you think are the potential advantage and disadvantages of adopting a new way of marketing? We will stand out from the other super markets, and therefore customers will remember us. Alerts of promotions or sales brings awareness to what we have to offer. The negative will definitely be the cost of setting up and installing the technical equipment and teaching employees to communicate efficiently with the customers in a short period of time. Also, our store caters to a lot of older people who aren’t capable of using electronic devices. Many of these people might not have a smartphone or simply may not be able to see the alerts. 6.! How do you already make people aware of your business? We have a big and bright billboard out near Kottayam (the center of the town) where everyone passing by can see. We also have signs by roads where cars passing by can see 7.! Do you think your employees are proficient in communicating with the customers? Most of the customers we have come here often, and so the employees know them. The employees already make an effort to communicate with the customers and having a conversation with the customers is no problem for them. They can efficiently communicate with the customers about newsletter service. 8.! How many people come to the store daily and how much does the average customer spend at the store? We have around 250-300 customers daily (which is 8000 monthly). The average customers spend around 800 rupees.
9.! What is the average amount of revenue earned on a day to day basis? On a daily basis, we earn approximately 160,000 rupees (4,800,000 monthly). 10.!Do you think 4 minutes is enough to communicate with the customer about the newsletter service? I think 4 minutes is enough because employees can simply ask if people want to sign up for it in that short amount of time. 11.!What particular market segment do you cater to? Most of our customers are in their 30s to 60s. 12.!What do you think is the probability that the subscription service will increase the profit, and increase the profit by what rate? I think the profit will increase by 15%, and there will be a 60% likely chance that we will unveil a subscription service.
Surveys with Employees
a.! b.! c.!
1.! What is the average amount of time that you spend with the customer at the check out? 1-2 minutes 3-4 minutes 4-5 minutes 2.! How would you describe most of your customers? Always in a rush Don’t care about the time Take all the time they need
a.! b.! c.! d.! e.!
3.! On a scale of 1-10, with 10 being the most comfortable and 1 being the least, how comfortable are you speaking to customers of a subscription service? f.! 6 g.! 7 h.! 8 i.! 9 j.! 10
a.! b.! c.!
1 2 3 4 5
4.! Approximately how many customers pay the store a visit? Approximately 150-200 visit the store daily.
Survey with customers 1.! How often do you visit Nithya in a month? 4.1.1-2 4.2.3-4 4.3.5-6 2.! Do you have access to an electronic device with internet connection? 184.108.40.206.1.! Yes 220.127.116.11.2.! No 3.! How often do you check notifications on your phone during the span of a day? 18.104.22.168.22.214.171.124.1-2 126.96.36.199.188.8.131.52.3-4 184.108.40.206.220.127.116.11.More than 4 18.104.22.168.22.214.171.124.N/A 4.! On a scale of 1-10, with 10 being the most comfortable and 1 being the least, how comfortable are you with sharing your email/phone number to Nithya? a.! 1 f.! 6 b.! 2 g.! 7 c.! 3 h.! 8 d.! 4 i.! 9 e.! 5 j.! 10 5.! Does the idea of getting emails of newsletters containing promotions, sales or coupons encourage you to come to this store more often? a.! Yes b.! No 6.! What type of subscription newsletter interests you? (email, text) a.! Email b.! Text 7.! Will GST Tax affect your purchases from this store? a.! Yes b.! No
Net Profit Margin Calculations
Ratio Analysis Net Profit Before Newsletter Service
Net Profit after Newsletter Service
+,-./0123-.4,210,.56-,0,7-.869.-8: +,-./0123-.4,210,.56-,0,7-.869.-8: . .×100%.. ;8,6?,. ;8,6?,. 588,000 ×100%. ×100% = 7.6%. 310,000 7,680,000 .×100. = 5.2%. 4,800,000.