Fully develop and describe at least two alternatives, and state which alternative is the best.

Principles Of Marketing
17th Edition
ISBN:9780134492513
Author:Kotler, Philip, Armstrong, Gary (gary M.)
Publisher:Kotler, Philip, Armstrong, Gary (gary M.)
Chapter1: Marketing: Creating Customer Value And Engagement
Section: Chapter Questions
Problem 1.1DQ
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I apologize for a long post, but I had to ensure all the information is here. The scenario's primary question is at the very bottom:

You are an assistant manager at the Best Bean Coffee Shop. The manager liked the work you conducted for the purchase of the new coffee machine so much that you were selected, again, to conduct another analysis and provide your recommendation. Currently the coffee shop is fully staffed and open 6 days a week from 05:00 – 21:00 (Monday-Saturday), running three shifts as identified in the table.

Morning (05:00 – 11:00)

Afternoon (11:00 – 17:00)

Evening (17:00 – 21:00)

2 each Cashiers

2 each Cashiers

1 each Cashier

5 each Baristas

5 each Baristas

2 each Barista

1 each Assistant Manager

1 each Assistant Manager

1 each Assistant Manager

 

The following table provides the current Costs/Revenues for the coffee shop.

Cost/Revenues Table

Shift

Position

N0

Wage / Hr

Hrs / Shft

Days / Wk

Wages / Week

Average Sales / Day

Average Utilities / Day

Average Operating Cost / Day

Roaming

MGR

1

 $27.00

8

5

 $1,080.00

 

Morning

Cashier

2

 $14.50

6

6

 $1,044.00

 $6,146.25

 $22.00

 $973.50

Morning

Barista

5

 $15.00

6

6

 $2,700.00

Morning

Asst MGR

1

 $20.00

8

5

 $800.00

Afternoon

Cashier

2

 $14.50

6

6

 $1,044.00

 $4,023.00

 $14.40

 $637.20

Afternoon

Barista

5

 $15.00

6

6

 $2,700.00

Afternoon

Asst MGR

1

 $20.00

8

5

 $800.00

Evening

Cashier

1

 $14.50

6

6

 $522.00

 $1,005.75

 $3.60

 $159.30

Evening

Barista

2

 $15.00

6

6

 $1,080.00

Evening

Asst MGR

1

 $20.00

8

5

 $800.00

 

Totals

 $11,490.00

 $11,175.00

 $40.00

 $1,770.00

 

The manager wants to know if it is financially viable for the Best Bean Coffee Shop to open for the morning and afternoon shifts on Sundays. You run a three-month long test allowing you to collect information on the three Sundays, using volunteers from the current workforce. Since, from the Cost/Revenues Table, each cashier and barista works a 36-hour week, you paid them regular time for 4 hours and double time for 2 hours. The assistant managers already work 40-hour week and were paid an additional 16 hours for working on a Sunday. You were told by the manager that the overtime pay would only be authorized for the Sunday test runs.

Please note: The manager stated there would be no changes in current wage rates, nor would there be a reduction in the current numbers of employees.

The data from the test is in the following table:

Sunday Test Costs and Revenues

Shift

Position

NO

Wage / Hr

Hrs / Shft

Overtime

Wages / Day

Average Sales / Day

Average Utilities / Day

Average Operating Cost / Day

Morning

Cashier

2

 $14.50

4

4

 $464.00

 $3,380.44

 $22.00

 $681.45

Morning

Barista

5

 $15.00

4

4

 $1,200.00

Afternoon

Cashier

2

 $14.50

4

4

 $464.00

 $2,212.65

 $14.40

 $446.04

Afternoon

Barista

5

 $15.00

4

4

 $1,200.00

Both Shifts

Asst MGR

1

 $20.00

12

12

 $2,880.00

 

 

Totals 

 $6,208.00

 $5,593.09

 $36.40

 $1,127.49

Note: This table includes overtime, if the shop is opened on Sundays, overtime will not be authorized.

 Determine if the revenue will cover all costs (wages, operating costs, utilities) for opening the store permanently on Sundays. In determining how to conduct this analysis, you determine that for the average sales per day during the regular workday was 750 orders (this included sales of coffee and other items for a total of $11,175). The mean number of orders per hour, per shift in the work regular workday can be determined by dividing 750 by the number of orders per shift, then by 6 hours per shift. Then, using the Sunday means for each shift (and the Poisson Distribution), you would like to know the probability that the coffee shop could at least meet the per hour orders achieved during the regular work week. Using the following table, determine if the chances of meeting the regular work-week orders is possible, then determine based on projected revenues if the coffee shop can earn a profit by opening on Sundays. If so, determine and recommend alternatives to opening the shop on Sundays (overtime will not be allowed); answer the following questions.

Orders/Shift

Weekday

Order/Hr

Sunday Order/Hr

Probability

≥ λ

Percent

Morning

413

69

38

~ 0.000002

0.0002%

Afternoon

270

45

25

~ 0.000094

0.0094%

Evening

67

11

NA

NA

NA

Total

750

 

 

 

 

 

Question:

  1. Fully develop and describe at least two alternatives, and state which alternative is the best.
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