MN5070 Practice of Consultancy Assignment

PART 1

Task 1: Cream Cake Nation [30 marks]

The client is the CEO of the Cream Cake Nation (CCN), an upmarket London-based patisserie, specialising in hand-made artisan cream patisseries and gateaux. Previously, you have already worked on optimising their cost structure. Your final recommendations related to this consultation were presented to the client in January 2022. The CEO, Honey Sweet, has now asked you to help further improve their profitability.

Additional Information:

Customers

• CCN has 2 types of customer: professional (independents: restaurants, tearooms and specialist retailers) and private consumers (in-store / cafe, online).

• The private consumers are not very loyal.

Company

• CCN makes high quality cakes and has good reviews.

• CCN currently has three distribution channels:

  1. Three CCN-owned stores, with cafes, in Kensington, Covent Garden and Spitalfields market;

  2. Independents: restaurants (six), tearooms (two) and specialist retailers (four);

  3. Cream Cake Nation Online

• Previously, the client ran Club Cream Cake Nation, where a mystery box of patisseries was delivered to club members on the first Saturday of each month. This channel was closed following the cost structure optimisation consultation, as its cost to revenue ratio was unsustainable.

• Cream Cake Nation’s total annual revenue for the year ending 31 December 2022 is £1,366,700. Revenue breakdown: CCN-owned stores contributed £1,078,300; sales to restaurants contributed

£129,600; tearoom contracts generated £28,800, a further £54,400 was earned by supplying specialist retailers, whilst the sale of online patisserie boxes contributed £75,600 to annual revenue.

• Average transaction values for CCN-owned stores, independents and online sales are £24, £20 and £35 respectively.

• Return on sales (margin) is 8% for the CCN-owned stores, 4% for the independent tearooms, restaurants and specialist retailers, whilst CCN return on online sales is 7%.

• Cream Cake Nation’s target profit for the next financial year is £150,000.

Industry and Competition

• The industry growth rate is in line with the UK GDP growth rate.

• Cream Cake Nation holds 8% of the local patisserie market (London and South East).

• Its main rival has 12% market share. In addition, there are a number of small local and regional patisseries serving the market.

• The main rival also has three distribution channels. Data on the main competitor’s profitability are not available.

NB: You may assume that Cream Cake Nation is not immune to the impact of increases in inflation (e.g. higher energy and commodity prices) and lower economic growth caused by crises, such as the pandemic or military conflicts.

Required (Comments for task 1 should not exceed 800 words in total.)

1. To understand the underlying dynamics, use Porter’s Five Forces to analyse the market for luxury patisseries. The words contained in the framework are not part of the word limit.

2. Estimate Cream Cake Nation’s gross profit for the financial year ending 31 December 2022 and present recommendations aimed at improving profitability. NB: Recommendations can be made in relation to any aspect of the business. You may assume you have visited the premises and are familiar with CCN’s current offering.

3. Comment on the feasibility of the profit target in the current environment. A full cost consultation was conducted in January 2022 but, in your analysis, you may discuss cost projections and the impact on profit, if considered relevant.

4. Present your interpretations and analysis (for points (a.) to (c.) above), deliverables (i.e. completed Five Forces analysis and profit estimate) and recommendations in a 600 to 800-word report addressed to the CEO of Cream Cake Nation. Your report should follow a clear structure and contain an introduction and conclusion with recommendations.

NB: Work for points (a.) to (c.) is completed ‘behind the scenes’. The resultant framework, analyses, calculations and recommendations should be presented to the client in the report and / or in the appendix of the report.

You are a business analyst consulting for Uber, a global ride-hailing company. It is present in over 85 countries but, as of 2022, it is not yet available in Cyprus. Uber has asked you and your team of analysts to determine whether they should / can (legally) enter Cyprus.

Required for Task 2 (Comments for task 2 should not exceed 800 words in total.)

Prepare a short 600 to 800-word report for Uber Technologies, Inc. addressing the points / questions below. Your report should follow a clear structure and contain an introduction and conclusion with recommendations.

1. In the introductory meeting, the client asks you how you plan to approach the viability and market entry questions. Provide a brief overview of the main areas you will focus on to analyse the decision problem.

2. Based on the proposed approach, how would you go about conducting the analysis and gathering the data and information required? Clearly identify the proposed data collection methods, as well as the key sources of information and insights you intend to consult.

3. Conduct a PESTLE analysis to:

   • examine the factors that might impact Uber’s planned ride-hailing operation in Cyprus;

   • identify how Uber might compete profitably in the taxi market in Cyprus.

The words contained in the framework are not part of the word limit.

4. To consider entering the market, Uber has set a minimum net profit target of $500,000 after the first 3 years. How much market share do Uber drivers need to capture to generate this level of profit for Uber? Desk research in January 2022 revealed the information outlined below.

NB: You will need to make reasonable assumptions about the reliability of the predictions. Show all calculations and formulae.

• Total predicted size of the Cyprus Taxi Industry (industry revenue) in 2022 is $55.35 million.

• Predicted average annual industry revenue growth for the next 3 years is 4.25%.

• Industry net profit margin is 12% (based on trips between 3 and 6 km).

Uber’s Basic Revenue Model: Uber earns money by operating a ride-hailing service and taking a percentage of fares (commission-based model). Uber takes around 20% of the fare charged to the customer; the remaining 80% is the driver’s income. Depending on passenger demand, fares can be charged at 1.5X, 2X or 3X the standard rate (dynamic pricing).

Task 1: Statistical Consulting [30 marks]

The client is Cheetah, an ultra-rapid grocery delivery company, operating out of several dark stores in central London since June 2022. It offers local grocery deliveries in under 15 minutes. Customers order their groceries via an app on their mobile device.

As a consultant to Cheetah, you have been asked to conduct a study to examine the level of take-up for ultra-rapid grocery delivery services. Specifically, you have been asked to evaluate whether there is a difference in the take up rate between consumers who are comfortable using mobile technology and those who are not.

A simple random survey was conducted among traditional supermarket shoppers. Two of the questions, taken from the research instrument, are reproduced below.