How to forecast $43.6 billion?

Apple has finally decided to give its shareholders back more now from the profit of $145 Billion. The shareholders demanded more return even though Apple posted their first decline in decades. Apple heavily relies on new product launches to make the mass amount of money; knowing this fact the company has decided to not launch any new products until fall and 2014. The company has to give the raging market a rest for a couple of months before they come out with something that will make the crowd go wild. The fall in the revenue has challenged the company to think of something truly innovative that will gain a higher popularity in sales than its competitors.

 The company did better than forecasted $39.2 billion; the actual revenue was $43.6 billion, exceeding the forecast by $4.4 billion. Apple had under forecasted due to past months revenue being over forecasted. As we learned in class, companies usually use naïve approach to forecast for their next month. Apple has been over forecasting since their iPhone sale success. Apple is not coming out with new innovative technology, their revenue has been declining therefore forcing the company to under forecast their revenue. This is the error of using forecasting because the company might not sell the same as the previous month because the company has not been able to come out with a product that would stabilize their revenue. In Apple’s case new product launches raise their revenue and place them on top of other companies.

 Many people are thinking that since Apple is not going to be launching any new products for a few months, the market is bound to fall. Samsung has been giving Apple good competition and now has been able to take over the market with recent launches. If Apple waits until fall to hit the market again with something innovative, will Samsung have taken over the market? Will Apple be able to compete with Samsung after staying out of the market for a couple of months? Only time will tell how innovative the new Apple products will be. Will the Apple products be able to beat the Google Glasses? Many people are not really sold on the new idea of using glasses as their cellphone but again no one can really tell how the market will react to products until they are launched. Before Steve Jobs died, he mentioned that his new invention was to make the TV remote user friendly. He emphasized that the remote was too complicated with so many buttons. This might be just the product to beat the Google Glasses or not. We all will have to wait for the next invention until fall of this year to find out.

Click here to read the article: http://trib.in/14El4B3

Sources: Gupta, Poornima. “Apple unlocks more cash for investors as profit slides.” Chicago Tribune 23 April 2013, Web. 28 Apr. 2013.

<http://www.chicagotribune.com/business/sns-rt-us-apple-resultsbre93m1b6-20130423,0,5337176.story?page=1>.

Starbucks Cuts Prices on Bags of Coffee

As we discussed in Chapter 2, cost leadership is one of the keys to achieving a competitive advantage over the opposition.  Having the lowest cost, as perceived by the customer, without sacrificing quality, is the key to beating the competition.  Starbucks is attempting to do just that by cutting the price of its bags of coffee by $1 per bag this year.  This reduction in price would make the cost of their bags of coffee comparable to those sold by Folgers, Maxwell House, and Dunkin’ Donuts, all of whom cut their prices this year as well.  Ultimately, Starbucks’ goal is to draw sales away from their competitors, even if they aren’t making as much money per bag of coffee.

The rationale behind the cut in price is to attract a new demographic to purchase their product.  Currently Starbucks’ in-house coffees are among the most expensive, yet they continue to outsell the competition.  By selling their bags of coffee for about the same price as their competitors, they are able to attract the lower end of the socioeconomic ladder, as opposed to just the upper end.  Assuming they aren’t sacrificing quality, the Starbucks brand bags of coffee would be the best available option to these consumers.  Overall, they would be reaching a much wider market then their competitors.

In order to earn as much revenue on bags of coffee as they did last year, Starbucks would have to sell 65% more bags at the new price.  Starbucks knows they probably won’t achieve those numbers, but if they continue to steal customers from their competitors, they will eventually reach that number and eventually sell even more.

The move also forces Starbucks’ competitors to make a tough decision.  Either they can keep prices where they are at, or they can continue to cut their prices and trim profits.  Another possibility is that they can cut volume.  Either way, Starbucks walks away a clear winner.  At the rate they are going, Starbucks is slated to run its competitors out of business.

I think this is a great move by Starbucks.  It’s no mystery that a majority of Americans prefer Starbucks coffee to other brands, and by making it more widely available, they can increase their sales exponentially.  Sales won’t increase immediately, but in the long run they most likely will.  Once consumers realize they can get their favorite, high-quality coffee for the same price as lower-quality brands, odds are they’ll opt for the higher quality product.  And even though the profit margins won’t be as high for the bags of coffee, they will still be huge on the in-house brews.  In the end, Starbucks has the highest quality coffee on the market as chosen by consumers, and at its new low price, Starbucks will have the competitive advantage as well.

Source:  http://www.businessweek.com/articles/2013-04-12/the-game-theory-behind-starbucks-big-coffee-price-cut#r=nav-r-story

Black Friday vs. Black Thursday !!!

 

 

It’s that time of the year again Black Friday deals. I never understand why so many people sleep outside all night to get something that is limited to very low number like five or ten pieces and the person there whose number eleven just got nothing but waited all night in cold weather. Last year I decided to try and shop at midnight I went to Macy’s waited in line for about two hours and when we finally got into the store I honestly didn’t find any good deals so I think it was not worth it for me to wait in cold weather for noting. I just wanted to experience it and I did but I don’t think I would repeat it again. Well I found this interesting article that talks about opening as early as 8:00pm on Thursday this year that means Thanksgiving will be cut short for a lot of people. Wal-Mart was the first one to announce that they will be opening as early as 8:00pm this year. And this is when competitors come in to place Sears also announced they will open at 8:00pm. Now Wal-Mart has to worry about their competitors and what they are offering to beat their prices.

Wal-Mart also announced that they will have enough inventory from 10:00-11:00pm for customers to get the same deal as they would get in store online. Now inventory managing will be a big part of this they will have to make sure that inventory will remain available and the numbers of inventory are accurate so that no problems will occur with consumers. Wal-Mart has to make sure that their entire inventory will come on time with correct amount to avoid any problems. The best way to make sure inventory is accurate is to forecast their inventory and make sure the demand numbers are correct. Some customers are already unhappy because they will have to cut their Thanksgiving with family and friends early to go shopping so that’s why inventory has to be done correctly so that customers will be satisfied. But what happens to those poor employees who want to spend some quality time with their family and friends on Thanksgiving Day? Now they have to come to work early but will the quality of employees towards customers be the same? Of course not employees will be unhappy and quality will go down. This is where Wal-Mart and Sears need to work on quality management system so that they will make sure their employees are happy so that customers will be satisfied and happy also. So maybe paying them double on that day will make their employees happier. So opening early is good but Wal-Mart and Sears need to make sure that quality, and inventory is in good shape for customers to be happy and for them to make good profit.

Do you think opening early this year is a good idea? And will quality and inventory be in good shape or will there be a problem?

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Winning with Customer Service

 

 

Operation management in the banking sector is challenging for me since I’m holding the duties of branch manager. Last class we have learned about operation management in the service sector. I didn’t realize that what I’m doing is considered as operation management. As you all know customer wants and satisfaction is the success measure of any business; i.e. if customer left our branch dissatisfied he will be unwilling to deal with the bank and it will affect the bank reputation.

I have just faced customer complaint last week when his car loan application went into a long process over our bank departments. He was saying that his friend applies for the same in other bank and he got the car after three days only. When I contact the other department asking about the reason for the delay it was not reason that will stop processing the loan and the loan can be processed now and then the customer is going to provide us with the requested document.
What I have realized here, bank departments that have no direct customer interaction will not do their job based on customer is first, what they do basically is to make sure that all documents needed are provided.

What do you think about operations, credit and risk department? How can they be involved in providing excellent customer service?

Moreover, the customer was complaining that the customer service representative was not clear about the missing document. I have talked to the customer service representative and realized that she did not read the document properly before sending it to the concern department and at the same time the car loan were approved from three departments without realizing the missing document.
I think the problem was from all departments starting from the front line to the back line. At the end his requested was processed in exceptional bases because the bank policy prohibits processing such loan without the required document.

Do you think the bank policy is a source of not meeting customer expectations? What about exceptions? Does it meet customer expectations?

At the end, the customer gets his car in the same day he raised the complaint and he left the bank satisfied and happy. He will be dealing with the bank as his loan will last for seven years which will leads for a strong customer relationship. As you all realized the problem was from the front line at the beginning, I have explain the problem with the customer service representative and instruct her how to deal with such cases.

How can the customer service representative avoid customer complaint? Is training enough?