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Business Problem Solution

Essay by   •  January 15, 2011  •  2,270 Words (10 Pages)  •  1,878 Views

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Business Problem Paper

In this paper, Team B will be analyzing a fictitious company. The company will be called Jungle Smoothies and its main function is to produce and sell fruit smoothies to the public.

Problem

Jungle Smoothies has been the leader in the smoothies industry for many years. It has several franchised locations in 10 different states and all have similar financial performances. Their top competitors are Jamba Juice and Tropical Smoothies. In recent months, Jungle Smoothies has been experiencing a decline in their profits. As member of the New Product development committee, an assignment was delivered to investigate the original problem that lead to the decrease in profits. The committee performed several interviews with current customers. In additions to the interviews, the committee also conducted visits to nearby competitors. Currently, Jungle Smoothie’s menu consists of six smoothies in the following categories: Supercharges smoothies, splendid dessert smoothies, splendid smoothies, Dessert smoothies, Power smoothies, and Low-Fat smoothies. From the competitor’s information gathered by the committee, the menu was very similar with the exception if a new product that was common in several of the competitor’s menu. The new product consisted of an organic smoothie. From the customer interview, a high number of current customer responded that they would choose an organic smoothies if offered over the other six types of smoothies. It seems that organic products have become an important part of people’s daily diet.

Defining the variables

In this paper, the two variables the committee will be focusing on are the introduction of the organic smoothie product and the number of customers. The new organic smoothie product will be labeled as the dependent variable and the increase in customers the independent variable.

Hypothesis

The null hypothesis tested in this paper is: The introduction of a new organic smoothie will have no affect in the profit and the number of Jungle Smoothie’s customers. The alternative hypothesis tested is: The introduction of a new organic smoothie will lead to higher profits by increasing the number of Jungle Smoothies customers.

When the observation was conducted of Jungle Smoothies competitors, it was discovered that the majority of them had launched the organic smoothie products several months ago and had a strong positive response towards the new product. From the competitors visited, 90% of them showed and increase in their reported revenues and 70% showed that they had an increase in profits. They all sell similar smoothies except for the organic smoothie recently introduced. From this information, the committee decided to conduct an analysis to test if the lack of an organic smoothie product in Jungle Smoothies menu, lead to the decline in profits and a decrease in number of customers.

To better understand the organic product market, the New Product Development Committee (NPDC) conducted a research. The research found that consumer demand is growing in the organic beverages, or drinks, sector. According to organic-nature-news.com, organic product sales in the U.S. are expected to reach $20 billion in 2007 and about 2/3 of consumers say that they have tried organic foods. “Interest in organic drinks is no doubt fueled by consumer demand for natural drinks without artificial flavoring, preservatives, and phosphoric acid, which is linked with bone loss (organic-nature-new.com).” Nowadays consumers are concerned about the chemicals, pesticides residues, high in sugar, and lack in nutrition drinks, which has leads to organic drinks as the next logical step. This is truer today, as more health conscious consumers purchase organic drinks for their children in order to avoid those harmful ingredients mentioned earlier. At grocery stores, it common to find a wide range of organic products, from organic baby food to organic cosmetics. It seems that organic products are the new trend in the consumers market and Jungle Smoothies failed to acknowledge that new trend.

Since it is almost impossible and time consuming to survey the entire population of smoothie drinkers, a sample from the population will be measured to represent the entire population. A discussion of the type and number of samples tested will be discussed later in the paper. With the high cost of producing and launching a new product to the market, a 95% confidence interval will be accepted for this research test. In other words, the level of risk the committee will take of rejecting the null hypothesis when it is true will be .05, or 5 % level. The data must have only a .05 chance of being wrong in order to launch the new organic smoothie. With the decrease in profits, Jungle Smoothies cannot afford to make a wrong decision in regard to this new organic product; a wrong decision could place the company in great financial distress. After selecting the level of significance, the committee will select the Test Statistics that best apply to the data sample gathered. Following the statistical test, a decision rule will be formulated which will state the conditions when the null hypothesis is rejected. In the final part of the analysis, a decision will be made based on the research and statistical test performed.

Defining the two Data Sources.

To continue with this project, team B used two types of data sources. They are Primary and secondary data sources. First of all it is important to understand that having data based on primary research is insufficient for any organization. The use of secondary data provides better alternatives and improves the chances of a project becoming a success.

Before purchasing secondary data, NPDC sketched out a perceptual map to serve as a starting point for our market research. The first step in the perceptual map was identifying the acceptance for adapting to an organic smoothie in the 10 states that Jungle Smoothies currently serve. Out of the 10 states, our data showed that 4 states seem to be more favorable towards adapting to the new smoothie. The four states are California, Nevada, Hawaii and New York. The research revealed that the above states are best chosen for our secondary research.

The NPDC has provided us some secondary data information for the above 4 states. They are classified into four areas, demographics, leisure and lifestyle, infrastructure and competition and are subdivided as follows.

• Demographics вЂ" Age, education and literacy level and gender and income.

• Leisure

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