Tesco Nature Scope And Purpose Of Strategic Management

Tesco Nature Scope And Purpose Of Strategic Management INTRODUCTION Tesco started as a one-man business in Londons East End. Tesco was founded by Jack Cohen, son of a Polish Jewish tailor. He sold groceries in the markets of the East End from 1919. The Tesco brand first appeared in 1924. The name derived after Jack Cohen bought a large shipment of tea from T.E. Stockwell (formerly Messrs Torring and Stockwell of Mincing Lane), he made new labels by using the first three letters of the suppliers name and the first two letters of his surname forming the word TESCO. The first Tesco store was opened in 1929 in Burnt Oak, Edgware, and London. The firm was floated on the London Stock Exchange on 23 December 1947. The first Tesco self-service store opened in 1948 in St Albans and is still trading in 2006 as a Tesco Metro store.The first Tesco supermarket was opened in 1956 in a converted cinema in Maldon, Essex. Tescos first superstore was opened in 1968 in Crawley, West Sussex. The group began selling petrol in 1974 and its annual turnover reached one billion pounds in 1979. Also In 1975 Tesco opened one of its first Hypermarkets in Irlam. The first Hypermarket under the Extra name opened in 1997. EXPANSION: In 1994, the company took over the Scottish supermarket chain William Low. Tesco successfully fought off Sainsburys for control of the Dundee-based firm, which operated 57 stores north of the border, paving the way for Tesco to expand its weak presence in Scotland. To the present day, Tesco has based its Scottish headquarters at the former Wm. Low offices in Dundee. From small beginnings in Scotland Inverness was recently branded as Tescotown, since an estimated 50p in every  £1 spent on food is believed to be spent in the three Tesco stores within the city. (Nationally, it is estimated that 1 in every  £8 is the proportion spent) It introduced a loyalty card branded Clubcard in 1995 and later an Internet shopping service. During the 1990s it expanded into Central Europe, Ireland and East Asia. In July 2001 it became involved in internet grocery retailing in the USA when it obtained a 35% stake in GroceryWorks. In October 2003 it launched a UK telecoms division, comprising of mobile and home phone services, to complement its existing internet service provider business. In August 2004, it also launched a broadband service. NATURE, SCOPE AND PURPOSE OF STRATEGIC MANAGEMENT NATURE: Tesco opened its first store in Edgware, North London in 1929.It is founded by John Cohen and T. E. Stockwell. Tesco mainly used strategies to build customer loyalty. It reached the  £billion pound turnover in 1979.It became the first UK business to reach  £2 billion pound and became the largest retailer in UK. STRATEGY: According to Johnson and Scholes strategy is defined as the direction and scope of an organisation over the long term; which achieves advantage for the organisation through it configuration of resources within a changing enviroment,to meet the needs of markets and to fulfil stakeholder expectations. Tescos growth over the last two or three decades has involved a transformation of its strategy and image. Its initial success was based on the Pile it high, sell it cheap approach of the founder Jack Cohen. The disadvantage of this was that the stores had a poor image with middle-class customers. In the late 1970s Tescos brand image was so negative that consultants advised the company to change the name of its stores. It did not accept this advice, yet by early 2005 it was the largest retailer in the United Kingdom, with a 29.0% share of the grocery market according to retail analysts TNS Super Panel, compared to the 16.8% share of ASDA and 15.6% share of third-placed Sainsburys, which had been the market leader until it was overtaken by Tesco in 1995. Key to success: Focus on customers. Focus heavily on value for money. Finest and low price. Core UK business. Non-food business. Retailing services. International Expansion. SCOPE According to Mintzberg and Quinn there are five definitions if strategy Strategy as a plan Strategy as a pattern Strategy as a position Strategy as a perspective Strategy as a ploy Tescos growth over the last two or three decades has involved a transformation of its strategy and image. Its initial success was based on the Pile it high, sell it cheap approach of the founder Jack Cohen. Levels of planning Planning of strategy in any organisation is categorised into three levels: Top level planning: this is done by the top management and is termed as strategic planning. It is a long range planning and is linked to long range goals. Second level planning: This is carried out by senior executives and is termed as tactical planning. The plans are devised to achieve the organisations main objectives. The long-range plans of the organisation are segmented and are oriented to functions and departments. Third level planning: This is the concern of the departmental managers and supervisors and is called activity planning or operational planning. It is confined to short term activities and also individual assignments and establishes performance of the organisation. Corporate strategy: It is concerned with the overall purpose and scope of the business to meet stake holder expectations. It is often expressed as mission statement of the organisation. The companys mission statement reads, Our core purpose is, To create value for customers to earn their lifetime loyalty. We deliver this through our values, No-one tries harder for customers, and Treat people how we like to be treated'. The underlying aim is of course to make higher profits, but there is a clear focus on customer service at the top level of the company. Business strategy: It is concerned with how a business competes successfully in a particular market. Tescos business strategy is to Expand overseas Maintain a strong uk business Expand into non-food merchandise Operational strategy: It is concerned with the operations to deliver the corporate and business strategy of the organisation. Tesco has its every little helps strategy to make both its employees and customers happy while achieving the organisational goals. PURPOSE Tesco adopts its strategy with a core purpose to create value for customers to earn their lifetime loyalty. This is expressed as two key values. No one tries harder for customers Treat people as we like to be treated. Tesco positions all its resources with a purpose to satisfy this strategy while achieving its organisational goals. PROCESS FOR DEVELOPING STRATEGIC MANAGEMENT While the corporate strategy of an organisation sets the objectives for different businesses; business strategy deals with individual sections of the overall business and the operational strategy directs and determines each function of the organisation. The process of business strategy of Tesco can be outlined as: Stating and understanding The Companys vision. Stating and understanding The Companys mission. Analysing the business environment. Crafting and evaluation of strategy. Implementation, monitoring and control. VISION Tescos vision can be clearly understood in the statement of its CEO Terry Leahy we have got only 5% of the non-food market in Britain, we have got only 6% of the convenience market and we have got only 2-3% of the banking market In all these examples we could be much bigger. This statement clearly presents the idea where Tesco wants to be in the future. MISSION A mission statement spells out the central purpose and shared values of a business organisation. Mission of Tesco is To create value for customers to earn their lifetime loyalty which is delivered through two key values no one tries harder for customers and treat people how they like to be treated. ANALYSIS OF THE BUSINESS ENVIRONMENT For the formulation of strategy, it is necessary to analyse the organisational environment. These would include political, economic, social and technological factors. According to Johnson and Scholes: Managers face difficulties in trying to understand the environment. First, the environment encapsulates many different influences; the difficulty is making sense of this diversity in a way which can contribute to strategic decision making. A simple analysis of the business environment so Tesco involves three aspects: Analysing Internal capabilities and resources(core competencies) Analysing external environment by PEST Analysis Analysing the competitive environment by Porters five forces Core Competencies Core competences relate to those resources and capabilities if the firm which enable to Attain a competitive edge in the market According to Johnson and Scholes core competencies create and sustain the ability to meet the critical success factors of particular customer groups better than other providers in ways that are difficult to imitate. Tesco identifies core competencies by three factors: Creation of new products and services which provides potential access to a wide variety of markets. Skill which makes a significant contribution to the perceived customer benefits of the end product. competitive unique skills which are difficult for competitors to imitate PEST ANALYSIS The external environment of an organisation is analysed by PEST analysis. It helps to identify the key changes that are taking place around the organisation and which influence it in the future. A PEST Analysis looks at Political Factors Economic factors Social factors Technological factors The following is the PEST Analysis for Tesco Political Factors Risks of potential competition commission enquiry GM- Food EU competition Law Economic Factors Intensive price competition between the large supermarkets Cost of products keep falling because of strengthening buying power Socio cultural factors Organic foods and drink Customer concerns about GM food, allergies and additives Animal welfare policies Environmental policies and practices Technological Factors Radio Frequency identity technology in operation of its supply chain Radio barcode technology for tagging cases. Self service check-out system. PORTERS FIVE FORCES Porters five forces are used to analyse the external environment of an organisation and to determine the attractiveness of the market. The five forces are: The bargaining power of customers The bargaining power of suppliers The threat of new entrants The threat of substitute products The intensity of competitive rivalry Bargaining power of customers The buying power of customers may influence Tesco to force prices down. This may lead to competition where the other rivals may also bring down the prices. Tesco should maintain the customer loyalty to stop them from drifting to others. Bargaining power of suppliers Demand of suppliers to pay high prices for their goods. Recently, the agitation by the dairy farmers to get high price for milk is an example. But market giants like Tesco has an overwhelming advantage over their suppliers where they dictate the price they pay their suppliers. Threat of new entrants Supermarket chains like Tesco manage the threat of new entrants by imposing barriers to entry. This is achieved by paying high price to suppliers and buying large volumes of goods. This makes Tesco to supply goods at cheaper prices to its customers where it corners the new entrants. Tesco also has the advantage of economies of scale. Threat of substitute products Tesco faces the threat of cutting down the prices of groceries and goods by other giants like Asda and Sainsbury. This may lead to lowering of prices where the buyer gets an advantage. Intensity of competitive rivalry Retail industry is the one where the profit margins are low and the competition is high. According to classical economics, rivalry between companies should drive profits to zero. All the above mentioned factors impact the intensity of competition for Tesco. Asda, Sainsburys, Morrisons and others with their expansion plans and strategies are making the competition tough. Their disciplined approach towards prices setting is preventing the destruction in profit war. Environmental evaluation of Tesco The environmental audit is reliant on the monitoring activity undertaken by the organisation. It includes Market intelligence Largest supermarket chain with a market capitalisation of  £26.037bn New strategies for mergers and expansion plans to US Effective and low prices Continuous monitoring and direct information on the sales figures in stores Efficient maintenance of customer loyalty. Technical intelligence RFID technology for supply chain management EPOs and Bar-coding technology Extension of RFID technology for tagging the cases through out the supply chain by 2007. Effective implementation of one in front policy at the tills to satisfy the customers. Acquisition intelligence Decision of receding from the bid to takeover Safeway. Expansion plans for US Other issues Convenience stores according to the needs of the people Decisions regarding the environmental issues Crafting a strategy By considering the above factors Tesco clearly crafted a strategy that keeps it in the leading position in all the aspects: The selected strategy of Tesco is To provide all the customers with excellent value and choice in UK business which is its biggest market and where Tesco enjoys top slot. Having a six element approach to be an international retailer while focusing on satisfaction of needs of the different local customers. KEY FACTORS FOR DEVELOPING STRATEGY The key factors for an organisation are those which exist within an environment and may generate a need for change. These are triggers for change in the organisation. The following is a brief description of the key factors which may lead to strategic change in Tesco. EXTERNAL ENVIRONMENTAL FACTORS Macro environmental analysis increases awareness of the relevant environmental changes at managerial level. This enhances strategic planning. Macro environmental analysis further focuses attention on the primary influences of strategic change and provides anticipation to opportunities and carefully develops responses to change. The following are the external environmental factors which pose challenges to Tesco High energy costs High recovery costs Improving position of competitors Risks of the potential competition commission enquiry Growing cautiousness among consumers STAKEHOLDERS Stakeholders can be defined as As those individual actors and parties, organisations and professions and institutions that have a bearing on the behaviour of the organisation as revealed in its policies and actions on the environment. Stakeholders can be divided into two categories; Those view the organisation externally Those have an internal interest External stakeholders for Tesco are competitiors, customers, suppliers, shareholders government departments etc.They judge the efficiency and try to influence its activities. So Tesco always determines the outputs required by the stakeholders. Internal stakeholders for Tesco are the owners, managers and employees. In large companies like Tesco there are thousands of shareholders who have a vested interest in the success of the business. MEDIA Media plays a very important role in an organisations strategy. It works in two ways; Interest in the success of the organisation and its subsequent positive feedback Interest in the proposed developments Tesco notifies well that the influence of effective public relations on the opinions of a wide range of groups will enhance the likelihood of success for its strategy. So it always maintains good relations with the media. Tescos media centre contain the latest news releases, images and briefing notes. Their latest TV ad campaign can also be viewed from their video library. The media people can also access to their media centre for easy access to the latest developments. LEGAL Organisations need to anticipate and prepare themselves for changes in legal procedures. The potential competition commission enquiry and other regulations are important legal factors which can influence retail sector now.Tesco has all the legal resources which enables it to respond to such changes well in advance and as a part of its developing strategy. ETHICAL These are the moral principles that should govern human relations and conduct. These are very important considerations in formulating strategy which involve subjective personal feelings about human behaviour. Tesco identifies as one of the key factors in its strategy and accepts this with enthusiasm and commitment. EDUCATIONAL In the present business scenario, the capacity to transmit knowledge through devices as the internet has become formidable. The most important and interesting aspect of the improvement in education and subsequent growth of knowledge has been the increasing professionalism of workforces in an organisation. Tesco understand this well and implements it in the improvement of skills of its human resources. It conducts training programmes a least two times a year. POLITICAL Political factors generally effect the organisation in two ways. One driven by the government pr by the multinational political initiatives and another concerned with the political shifts within the particular business environment. INTERNAL ENVIRONMENTAL FACTORS The following are the factors that are instrumental to the internal environment of Tesco. Organisational policy The mission statement of an organisation sets out the purpose of a business The mission statement of an organisation is refined over the time to reflect the developed or enhanced capabilities of the business .The following are the purpose statements for Tesco which gives a clear picture of its policy Scope of an organisations activities is a fundamental element of strategy. Tescos scope relates to the extent of the market into which it sells its products and services. It is already the largest retailer in UK and is planning to expand to US .It has already wide markets in Europe and Asia. A key consideration for a firm is to identify what areas of activity to pursue in its markets. Tesco targets customers of all ages with its products and services ranging from food, household products and retail to insurance and personal finance. An important aspect of strategy is for a company to identify the positions held by their products and services in the market place. Tesco has already built a very strong businesses over the time with very strong market positions. Each and every one of them has huge potential for further growth. Human resources Tesco is the largest private sector employer in UK. Tesco is the largest private sector employer in UK. It employs 250,000 staff alone in the UK and 367,000 staff worldwide. It has 2365 stores all over the world. Tesco employs about 11,000 employees every year. It recruits about 80 to 150 graduates each year to two training schemes one store and one office based. It recruits by in-store advertising, events in local areas. and recommendations From existing employees through an employee referral scheme. These employees are the need for effective communication in the field of management. Financial resources As per the statistics of 2006 Tesco is the fourth largest retailer in the world. Its market capitalisation was  £26.035 billion which was the largest of any retailer based outside the united states. Tesco also has got tremendous property portfolio. It does its own development and owns about 85 of all its assets around the world. And always Tesco invests a lot in its property. According to company authorities over the next five years its property value will be  £5 billion and still be a predominantly freehold property company. All these factors are described as the key factors for Tesco DEVELOPMENT AND EVALUATION OF STRATEGIC OPTIONS Strategy whether developed for a whole organisation or for an operating department or a team follows the same building process .Its central concern is to create a long-term vision of where we want to be or what we would like to become .Strategy that an organisation adopts should be feasible and practicable. Its pulling power is extremely important to survive in the tough competitive environment where an organisation operates .The art of strategic development involves a set of sophisticated tools to facilitate the process. The following is a brief context of different strategic options for TESCO and their evaluation. PEST ANALYSIS To develop a strategy for an organisation to assure its long-term effectiveness it should carry an analysis about its future. For this PEST Analysis is the best tool. It carries analysis of four or six major factors which can effect the organisation in future .TESCO which is the largest player in retail sector carries PEST Analysis to analyse the external factors which may affect in the future .The following is the PEST Analysis for TESCO: Political and legal considerations Risks of potential commission enquiry TESCO may face the risk of the potential commission enquiry in future which aims to curb the unhealthy competition in the retail sector. GM-Food With increasing awareness in the consumers all over the world TESCO may face the risk with Green peace workers regarding the labelling of genetically modified foods. . EU Competition Law EU Competition Law constituted to regulate monopoly power may impact TESCO and its expansion in the European Union in the near future. Economic considerations Intensive price competition between the large supermarkets Cost of products keep falling because of strengthening buying power Social Factors Organic foods and drink Consumers growing concerns about the organic food and drinks may influence in near future Customer concerns about GM food, allergies and additives With growing cautiousness and discontent about the GM food and use of allergic causing agents and additives in the manufacture of food may show impact Animal welfare policies Animal welfare policies which oppose the testing of the products on animals Environmental policies and practices Green peace workers and changing concerns about environmental issues. Technological Factors Radio Frequency identity technology in operation of its supply chain Use of RFID technology in its supply chain helps TESCO to efficiently carry its operations and maintain its position. Radio barcode Technology for tagging cases. Use of Radio barcode Technology to tag the cases and extending this technique to the entire chain by the end of 2007 will show an impact on operations in TESCO. Self-service checkout system SWOT Analysis IT is a commonly used tool .Its main purpose is to locate the organisation in its operating environment and try to assess its internal and external capabilities and vulnerabilities. SWOT stand for strengths, weaknesses, opportunities and threats. Strengths are internal and opportunities are environmental. Similarly weaknesses are internal and threats are environmental. The following is the SWOT analysis for TESCO Strengths These are the strengths of TESCO TESCO s Brand name Loyal customers Largest player in the retail sector Well established supply chain Excellent ware housing capability Largest online grocer Great store locations Skilled work force Club card scheme for enhancing customer loyalty. Weaknesses These are the weaknesses of TESCO Vast usage of fossil fuel in transport chain and super market heating systems Lack of integration between departments at certain times Opportunities These are the opportunities where TESCO can explore in future Improving customer relationships Real growth opportunity for grocery retailing in the newly enlarged European Union. Increasing sales through better integration of high street and internet resources Threats These are the threats that might affect TESCO in the future. High energy costs Increasing taxes on retail items Expansion of low cost supermarkets like LIDL. Recovering competitions like Sainsburys and Morrisons. A weakening economy An increase in unemployment PORTERS GENERIC STRATEGIES After establishing the strengths and weaknesses of the organisation and analysing the competitive environment, we have to establish the generic strategy of the organisation. No set of the strategic tools will be complete without a look at Michael porters generic strategies. Porter advocates, Gaining and maintaining competitive advantage The three generic strategies of Porter are Differentiation This is a strategy where the organisation offers a product or service which is unique compared with those of its competitors .This differentiation must be known to at least a segment of the market. Cost Leadership This is a strategy where the organisation enables itself to provide the products or services at a cost less than any other competitive organisation. It is the ability the organisation has to price below competitors if and when it needs so. Focus This is a strategy where the organisation targets its products or services at a given sector of the market with great accuracy and with a depth of capability and knowledge to support its position in the sector. In the retail sector with a very low profit margin the environment is hypercompetitive .TESCO being the largest player adopts the Cost Leadership strategy to challenge its competitors. TESCO has all the capabilities to adapt to this strategy. It develops its internal resources and its core competencies to support this strategy. In addition to these a number of generic strategies have emerged to define the modern organisation .The following is a list of the strategies. Reducing cost base Improving quality Getting closer to the customer Shorter cycle times Strategic partnerships Ability to change fast Of the above mentioned generic strategies, TESCO adopts the following: Reducing cost base To cut down the expenses and to increase productivity and efficiency, TESCO adopts this strategy to face the challenges of price war with its competitors, high property costs a and to provide value based products to the customers. Improving quality TESCO always concentrates on improving quality to rule the existing markets. It adopts new techniques and softwares both in the logistics and in-store operations to consistently serve the customers. Getting closer to the customer Customers are whimsical, customers are fickle, customers are not loyal. The ability to anticipate this fickleness is a strategic strength.TESCO understands this well and introduced club card schemes which helps TESCO to have millions of loyal customers. THE ANSOFF MATRIX This is a classic model in strategy building .Its main purpose is to analyse the organisations approaches to its products and to its market to ensure that an appropriate marketing strategy is being pursued .The following is the An off matrix for TESCO Current products New products Current markets Market penetration Improving services Improving quality Product development Expand own brands like The Finest and TESCO Value. Expansion into non-food sector Adding new products to the existing product line New markets Market development International expansion and globalisation Home shopping Developing small express stores Diversification New services Using the Ansoff matrix in conjunction with the BCG matrix, TESCO conducts a useful review of its strategy to achieve its vision. EVALUATION The BCG matrix The Boston Consulting Group matrix is a valuable tool .Its purpose is to analyse the organisations product portfolio. The definitions used in the BCG matrix are very precisely expressed in terms of the generation and use of cash. This makes this matrix a sharp-edged tool. the following are the definitions used in BCG matrix Stars These are the products that are performing well .They are generating positive cash and they usually require continuous update to maintain their market share. Problems These are the products which are not performing and not generating sufficient cash to maintain them in their markets. Cash cows These are the products which are performing well in markets which are growing slowly or are static. They are probably generating more money that can be profitably invested in them. Dogs They have low market share in markets which are growing slowly or are static. They may be consuming more resources to maintain their availability. They need quick decisions. The following is the BCG matrix for Tesco Market share High low Star On-line shopping Organic foods Loyalty cards Non-grocery items New services Problems On-line shopping with demographic analysis Home delivery of products Cash cows Cash cows Branded produ

Behavioural Finance Essay

Hypothesis and the extent to which they can be explained by behavioural finance theories Finance that is based on rational and logical theories, such as the  capital asset pricing model  (CAPM) and the efficient market hypothesis (EMH). These theories assume that people, for the most part, behave rationally and predictably. The Efficient market hypothesis assumes that financial markets incorporate all public information and assets that share prices reflect all relevant to the firm information (Fama, 1970). Relevant information includes past information, publicly available information and private information. Efficient market is divided into three categories. Weak form efficiency is when stock prices reflect only the past information, semi-strong form is when past information and all publicly available information is reflected and strong form is when all the past, publicly available and information only available to company insiders is reflected on the stock prices. However, there are some anomalies and behaviors that couldn’t be explained by EMH. Market participants often behaved very unpredictably. However there is a new study called behavioral finance that is trying to explain all these anomalies. Behavioral finance studies the irrational behavior of the investors. Weber (1999) makes the following observation: ‘Behavioral Finance closely combines individual behavior and market phenomena and uses the knowledge taken from both the psychological field and financial theory’. Behavioral finance attempts to identify the behavioral biases commonly exhibited by investors and also provides strategies to overcome them. Some of the main problems with EMH may be cause by heuristic responses to new information, psychological anchors, overconfidence, social fads, framing and regret avoidance and herd behavior. Overconfidence: According to Nevins (2004), overconfidence suggests that investors overestimate their ability to predict market events, and because of their overconfidence they often take risks without receiving commensurate returns. Odean (1998) finds that investors tend to overestimate their ability, unrealistically optimistic about future events, too positive on self-evaluations, over-weight attention getting information that is consistent with their existing beliefs, and over-estimate the precision of their own private information. Overconfidence about private signals causes overreaction and hence phenomena like the book/market effect and long-run reversals whereas self-attribution maintains overconfidence and allows prices to continue to overreact, creating momentum. In the longer-run there is reversal as prices revert to fundamentals. Psychological Anchors, Overreaction: Good news should raise a business’ share price accordingly, and that gain in share price should not decline if no new information has been released since. Reality, however, tends to contradict this theory. Oftentimes, participants in the stock market predictably overreact to new information, creating a larger-than-appropriate effect on a security’s price. Furthermore, it also appears that this price surge is not a permanent trend – although the price change is usually sudden and sizable, the surge erodes over time. Heuristic responses to new information: Availability heuristic is used to evaluate the frequency or likelihood of an event on the basis of how quickly instances or associations come to mind. When examples or associations are easily brought to mind, this fact leads to an overestimation of the frequency or likelihood of this event. Example: People are overestimating the divorce rate if they can quickly find examples of divorced friends. People tend to be biased by information that is easier to recall. They are swayed by information that is vivid, well-publicized, or recent. People also tend to be biased by examples that they can easily retrieve. ( Tversky and Kahneman, 1974) Confirmation bias  is a cognitive bias whereby one tends to notice and look for information that confirms one’s existing beliefs, whilst ignoring anything that contradicts those beliefs. It is a type of selective thinking. The reason for overconfidence may also have to do with hindsight bias, a tendency to think that one would have known actual events were coming before they happened, had one been present then or had reason to pay attention. Hindsight bias encourages a view of the world as more predictable than it really is (Shiller, 2000). This is the characteristic of investors, when looking back, seeing events that took place in the past as having been more predictable than they seemed before they happened. Likewise, things that didn’t happen seem, with hindsight, much less likely to have happened than they did beforehand. Self-attribution bias occurs when people attribute successful outcomes to their own skill but blame unsuccessful outcomes on bad luck (Shefrin, 1999). Availability bias is the availability deviation is a general rule or a mental shortcut which lets people guess the probability of a result and to what percent it may appear in their daily life. Those who commit such a deviation consider the easily recalled events more probable than those they can hardly imagine or perceive. Availability bias declares the person’s tendency toward deciding and judging based on available and easily accessible data (Tversky and Kahneman, 1982). Herd behavior which is the tendency for individuals to mimic the actions (rational or irrational) of a larger group. Blackmore (1991) states ‘Within an hour of birth , humans engage in imitation’. There are a couple of reasons why herd behavior happens. It’s unlikely that a large group could be wrong. After all, even if you are convinced that a particular idea or course or action is irrational or incorrect, you might still follow the herd, believing they know something that you don’t. Recency bias is the tendency for people to place greater importance on more recent data or experience. This is the problem of putting too much weight on current events or data and not enough weight on past, historic trends. Many investors expect the market to continue rising in a current bull market; likewise, these same investors often expect a current bear market to get worse. Recency is shown in momentum investing when investors buy â€Å"hot† stocks simply on the basis of their recent strong performance. Kahneman and Tversky (1973) find that people usually forecast future uncertain events by focusing on recent history and pay less attention to the possibility that such short history could be generated by chance. It is believed the net effect of the gains and losses involved with each choice are combined to present an overall evaluation of whether a choice is desirable. However, research has found that we don’t actually process information in such a rational way. In 1979, Kahneman and Tversky presented an idea called  prospect theory, which contends that people value gains and losses differently, and, as such, will base decisions on perceived gains rather than perceived losses. Thus, if a person were given two equal choices, one expressed in terms of possible gains and the other in possible losses, people would choose the former – even when they achieve the same economic end result. Regret avoidance is the tendency to avoid actions that could create discomfort over prior decisions, even though those actions may be in the individual’s best interest. Researchers have argued that one of the reasons that investors are reluctant to sell losing positions is because to do so is to admit a bad decision. This reluctance can be linked to both regret avoidance and belief perseverance. To avoid the stress associated with admitting a mistake, the investor holds onto the losing position and hopes for a recovery. According to prospect theory, losses have more emotional impact than an equivalent amount of gains. Prospect theory also explains the occurrence of the disposition effect, which is the tendency for investors to hold on to losing stocks for too long and sell winning stocks too soon. The most logical course of action would be to hold on to winning stocks in order to further gains and to sell losing stocks in order to prevent escalating losses. The flip side of the coin is investors that hold on to losing stocks for too long. Investors are willing to assume a higher level of risk in order to avoid the negative utility of a prospective loss. Unfortunately, many of the losing stocks never recover, and the losses incurred continued to mount, with often disastrous results. The January-Effect is where the average monthly return for small firms is consistently higher in January than any other month of the year; in the UK this is observed in April. This contradicts with EMH, as EMH predicts that stocks should move at a random walk. January returns are greatest due to yearend tax loss selling of shares disproportionally (Branch 1977). Another anomaly of this type is the Weekend-Effect, where Fama (1980) found that returns on Mondays tend to be negative if compared to any other week day, but this has disappeared in the UK by the 1990s. Some theories that explain the effect attribute the tendency for companies to release bad news on Friday after the markets close to depressed stock prices on Monday. Others state that the  weekend effect might be linked to short selling, which would affect stocks with high short interest positions. Alternatively, the effect could simply be a result of traders’ fading optimism between Friday and Monday. Index effect is a phenomenon where the addition to, or deletion from, a stock index causes a change in the price, trading volume, volatility or operating performance of the stock concerned. A stock entering an index will automatically receive increased demand from institutional investors – principally index tracker funds and exchange trade funds (ETFs) – while a deleted stock will experience reduced demand. The fact that a stock jumps in value upon inclusion is once again clear evidence of mispricing: the price of the share changes even though its fundamental value does not. Another anomaly is P/E effect from CAPM model; portfolios with low P/E ratios outperform those with high. The low price-earnings ratio effect occurs because stocks with low price-earnings ratios are often  undervalued and their prices eventually rise because investors become pessimistic about their returns after a bad series of earning or bad news. A company with high price to earning tends to overvalued (De Bondt and Thaler, 1985). Winner-Loser anomaly De Bondt and Thaler (1985) found that shares which initially earn extreme positive return (winners) or extreme negative returns (losers) experience extended reversals in their performance over long horizons. De Bondt and Thaler (1985) suggested the overreaction hypothesis as an explanation of their result. This hypothesis claims that the market overreacts to information. That is, the market overweights the most recent information and underweights earlier information. However, this phenomenon is reversed when it is recognized that the market’s expectations were indeed an overreaction to the information released. This hypothesis also offers an explanation of the P/E effect. Fama and French (1992) showed that a powerful predictor of returns across securities is the ratio of the book value of the firm’s equity to the market value of equity. After controlling for the size and book-to-market effects, beta seemed to have no power to explain average security returns. One explanation is that investors overreact to growth aspects for growth stocks, and value stocks are therefore undervalued. According to some academics, the ratio of market value to book value itself is a risk measure, and therefore the larger returns generated by low MV/BV stocks are simply a compensation for risk. Low MV/BV stocks are often those in some financial distress. All of these anomalies may be explained by behavioral finance. Behavioural finance is the study of the influence of psychology on the behavior of financial practitioners and the subsequent effect on markets. Behavioural finance is of interest because it helps explain why and how markets might be inefficient. There are series of  behavioural biases  Ã¢â‚¬â€œ strange twists in human nature that cause us to act irrationally and against our own interests. On the other hand all of these anomalies may instead be an artifact of data mining. After all, if one reruns the computer database of past returns over and over and examines stock returns along enough dimensions, simple chance will cause some criteria to appear to predict returns. May be this is why some anomalies appear to be lost at some point of time e. g. the weekend effect during the 90s.

Costa Coffee Essay

1. Executive summary In this business report we are analysing the business environment in which our company – BESO and its main competitor – Costa Coffee operate. The main objective is to research, analyse and understand the competitor’s business strategy, to find out if there is a gap in their action plan and how we can take advantage of this. The report consists of SWOT analysis of BESO and PEST analysis of both companies. The target markets of both – BESO and Costa Coffee are similar. That makes the competition between them even bigger. The report also discusses the marketing approach and the various advertising campaigns conducted by Costa Coffee and the advertising techniques we decide to adopt in the long run. The distribution system of Costa Coffee is also considered and plans to expand to different locations. The pricing strategy of BESO is based closely to the strategy of Costa Coffee as we have adopted competitive pricing. In terms of ethical issues we examined the various types of corporate social responsibilities of Costa Coffee. 2. Introduction. The business report includes an analysis of Costa Coffee as a main competitor of BESO Coffee. The report examines the business environment where both companies operate in. It has been requested from the Marketing Director of BESO and also has to be focused only on the UK market. 3. BESO – Brief history BESO Coffee is a coffee chain settled in the UK in 2001. It has been established by an independent trader but later on when the business has grown, new stakeholders appeared. At first BESO’s target market was limited as well as the products it offered- only a few types of coffee and limited types of confectionary. However, only two years after launching BESO on the market it became popular through different groups of people, therefore the menu became much diversified and the target market as well. BESO has shown great performance during the years and has become one of the most recognized names on the current market. That is why Costa Coffee is determined as a main competitor of BESO. 4 5 The Marketing Profession 4. SWOT and PEST analysis 4. 1. SWOT analysis Strengths †¢ †¢ †¢ †¢ †¢ Efficient and trained staff Customer loyalty Brand recognition High quality coffee Friendly and relaxing atmosphere for our customers. Weaknesses †¢ †¢ †¢ †¢ †¢ †¢ Limited number of outlets Low levels of advertisement Interior design needs updating More range of the types of coffee available. Continual change in consumer taste Can be seen as an unhealthy product Opportunities †¢ Based in Central London which covers a large demographic of customers Olympics 2012 will bring in more sales Introduction of new products including healthy options. Retailing mugs and coffee equipment Threats †¢ †¢ †¢ †¢ Customers demanding fair-trade and organic coffee. Big chain coffee shops dominating the market. Economic issues and crisis Lack of ownership of primary resources e. g. Coffee farming. †¢ †¢ †¢ 4. 2. PEST analysis There are many different Political, Economic, Social and Technological issues that both our company and also Costa Coffee face within the coffee industry. Firstly, the first political issue to consider is that majority of coffee beans are brought and made in developing countries, so companies need to ensure that their coffee is made by fair-trade dealers and they need to consider the ethical conditions of the labor used. Another political issue includes all the taxes and tariffs incurred by any business operating within the UK, whether it be import tariffs or VAT on goods sold. The economic factors that our companies face are similar to the issues faced by many businesses within the whole goods and services market, this including the economic recession of 2008. Customers now have less disposable income to spend and as a result cut-down on the purchasing of non-vital goods. This is due to of unemployment rising and the levels of debt increasing. The social factors that need to be taken into consideration is that consumers are spending more money on coffee due to the demand for quality goods. This can be seen in the comparison of value of tea and coffee industry with coffee valuing at 738 million according to the Times (2008). As a result, companies need to ensure that buying coffee is not only a quick purchase, as they need to have value-added for customers including high quality coffee and a relaxing 5 6 The Marketing Profession atmosphere. Lastly, the technological issues that both our company and Costa face is the introduction of self-made home coffee by the use of coffee machines specifically tailored to make at home, for example, the Senseo coffee-machines. This can be seen as a threat to coffee shops as it is a cheaper alternative for customers in the long run. 5. Target market According to a Mintel report titled â€Å"Coffee Shops† published February 2012, â€Å"Two thirds of consumers buy coffee out of home, rising to three in four among 16-24-year-olds as core users†. Costa Coffee has the highest number of outlets within the UK totaled to 1,302 coffee shop chains as opposed to Starbucks who has 739 and Caffe Nero with 509 shops. It also claimed that â€Å"Costa has different store designs to suit different purposes such as ‘Metro’ which is aimed at the younger/urban consumers and ‘Evolution’ which is designed for more mature customers in provincial locations. It states its customer segments are ‘Recharge, Relax, Refuel’†. Therefore the target market for Costa Coffee ranges from a wide range of customers of different ages as it caters to many different needs. Students have been said to make up 30% of their target market, Professionals 45%, Families 10% and mature consumers 15% of the clientele. At BESO Coffee, our market we aim to target at is very wide as it ranges from teenagers to mature customers. We even target at families as we offer menus for younger children and parents. Our products are reasonably priced so it can be bought from people of many different income level groups, from working to upper class. 6. Marketing approaches Costa coffee have used many different marketing approaches and campaigns in order to succeed within the industry as it is important to continually update their marketing strategies. Costa has introduced campaigns such as ‘How Do You Like Yours’, which allowed customers to customize their coffee’s by for example adding espresso or syrup. This helps them differentiate themselves from competitors as it gives consumers more power and control over their purchase. Another campaign introduced by Costa was the arrival of Costa light in 2011, which offered low-calorie and healthier options to customers. This was an important step for Costa as there has been an increase in healthy eating trends, which can be seen in the figure below. Figure: Consumer demand for display of calorie content on restaurant menus, June 2010-December 2011 6 7 The Marketing Profession. Other campaigns included the launch of Costa Coffee Gift Card in November 2011 which allowed customers to buy card with pre-paid amounts of up to ? 75 and a more recent campaign at the beginning of 2012 when Costa collaborated with the Spirit Pub Company which ensured that Costa coffee would be used in its restaurants chains including Chef & Brewer and Flaming grill. Costa has used many forms of media to advertise their campaigns to the public. One method used to inform customers was through the use of television advertising in 2008 whereby Costa launched its first ad. The advert helped to illustrate the â€Å"superiority of Costa’s products† and according Reynolds (2010) its message was that â€Å"the brand is on a mission to save the world from mediocre coffee and seven out of 10 coffee lovers prefer Costa†. Other forms of media used by Costa include Billboards as it can be seen by many commuters within the UK by their use of big bold writing and minimal distraction of the main message. Their billboards are distinctive as they have a continual theme colour, text and logo, which are recognised by customers. Our approach to our marketing campaign is to use alternative uses of media to portray our message, including the use of the Internet, as it is a popular form of media used in today’s society. We aim to use Facebook and Twitter to advertise our campaign and the company as a whole as it covers a large demographic. 7. Distribution strategy Costa operates in the UK through its own coffee shops, franchises and wholesale outlets. On the18th of October 2011, Whitbread stated that the number of Costa UK stores had risen from 1,217 in March 2011 to 1,302 in September 2011, including 95 openings and ten store closures. In comparison, Costa International increased its stores from 654 to 701 during the same period, including 72 openings and 25 closures. Meanwhile Costa Express/Coffee Nation units increased from 877 in March 2011 to 934 in September 2011, taking account of 79 openings and 22 closures. These units are partnered with service station operators such as Moto, Esso and Welcome Break, retailers like Tesco and The Co-Operative and foodservice group Compass (Mintel 2012). In a market with low loyalty levels, advertising and promotion is important in keeping brands in the forefront of consumers’ minds. Costa Coffee looked to sustain an emotional response among consumers with the marketing supporting its launch of Costa Light variant in autumn 2011 through an advertising campaign that used slogans such as ‘All the love, none of the handles’ and ‘Extra feel good in every cup’ (Mintel 2012) Customers were also encouraged to see the lighter side of life with its Costa Light Comedy Challenge competition. Costa’s aim was to showcase up-and-coming comedians by asking them to submit a one-minute film via its website. A public vote then saw the top ten entries from five regions go through to a further round to be judged during one-off events across the UK, with the campaign finally culminating in two regional winners performing at The Comedy Store, London (Mintel 2012). Costa Coffee’s distribution system is broad with a balanced portfolio across high streets, retail parks, concessions, airports, rail and other travel hubs as well as an increasing number of stores in new locations such as universities and hospitals. Innovative distribution channels, such as Costa Express and Drive Thru are developed. They will extend the brand’s reach and increase accessibility for the customer (Whitbread, 2010). 7 8 The Marketing Profession Andy Harrison, chief executive of Whitbread said that popping out for a coffee has become a â€Å"firm fixture† of peoples’ lives. â€Å"Coffee culture has grown massively over the last five to 10 years – people have a real demand for quality coffee and a choice of different coffees,† he said. â€Å"When I was kid everyone wanted a Nescafe – that has definitely changed. † (The Guardian 2011). 8. Pricing strategy. Costa Coffee is a well-known, high valued and trusted cafeteria all over the world. They offer wide range of high qualitative coffee drinks and food, excellent services and relaxing atmosphere. Costa relies on their superiorities and offer comparatively higher prices because they have realized that the luxury comes with the price. Costa Coffee offers two sizes of drinks – medium and large and the price difference between them is not significant. In this way they encourage their customers to buy the bigger size, because the amount of the drink is bigger and is on almost the same price as the medium one. But even the medium size of cappuccino is served in a cup with the size of soup bowl, so Costa Coffee has a reason to charge a relatively higher price because of the value they give, even though in most cases customers do not need such a big amount of drink although they have to pay for it. In this way, Costa is able to sell cheaper coffee to regular customers, who are aware of the amount of the drink (with elastic demand) and sell more expensive coffee to infrequent visitors, therefore the cafeteria makes big profit from each cup of coffee. This is the corporate strategy and how Costa found a way to charge comparatively higher prices than most of their competitors. This strategy has some disadvantages and threats such as the present credit crunch, which might affect the sales and the budget of Costa Coffee as they target middle and upper middle class, therefore in the time of recession customers may prefer some of the cheaper competitors. 9. Pricing strategy that we will adopt – competition based pricing strategy One of the biggest advantages of the †Competition based pricing strategy† is that in the same time you are focused on your business and objectives and on the competition’s strategies. Once you understand what the competition is doing, you have the chance to do everything better and to gain a competitive advantage (Jobber 2008), therefore to increase the number of customers and to gain bigger market share. There are three types on competition based pricing methods: †¢ †¢ †¢ Price your product the same as the competitor Set your price to increase customer base Seek larger market share through price Compared to Costa Coffee we are fairly new to the market so it would be more appropriate for BESO to adopt the †Competition based pricing† as a strategy that will allow us to grow fast as competitive brand. In order to achieve biggest results we will match/mix the three competition-based pricing methods. BESO will offer similar products as/like the Costa’s products but on lower prices, therefore BESO’s market department must always be aware of what the competition is offering in order to provide better value for money. In this way BESO will has the opportunity to outline its advantages as comparing similar products as those of the competition but on lower prices (even pence). Once customers understand our priorities they will use to come to BESO as a place, which offers better value for money, 8 9 The Marketing Profession. therefore we will increase our market share (Palmer and Hartley 2006). In terms of increasing customer base, the process is similar to market penetration, we have to select a price that will beat the competition and doing that we will motivate customer to notice our products and to make a purchase decision. Market penetration pricing works well in the introduction stage of the product life cycle and in a highly competitive market, as you increase the production some of your costs will decrease. During the next stages of the product life cycle the price can be increased (Jobber 2010). The easiest way to increase the market share of BESO is to select prices that will attract and hold as many customers as possible (depend on target). It is recommended to adopt the †Market – share pricing† after the business achieved market penetration, because they are linked as the market share happens when large volume of products are sold. So it is better if things happen step by step. And finally the market share is calculated by dividing the amount of each company sells out of the total market and in this way the market leader is determined. 9. 1. Disadvantages of †Competition based pricing† †¢ †¢ †¢ There is a danger to ignore your own production cost if you focus too closely on the competitors’ prices. It takes more time to research and update competitors’ information. Competitors also can copy whatever price you select. 10. Customer service Loyalty is particularly low in the coffee shop market, making customer retention a key area of improvement going forward (Mintel 2012). At the start of 2012 Costa Coffee launched the ‘Just How Do You Like Yours? ’ campaign. It aims to highlight the customizable elements of its products, a key differentiator to its lower-priced non-specialist competitors such as EAT and Pret A Manger. A clear pricing strategy was also included in order to appeal to consumer’s sense of value for money. For example, customers can now add an extra shot of espresso or sugar-free syrup shots to their drinks for 35p per unit. Also, in 2011 Costa Coffee launched gift cards (Mintel 2012). Although consumers state that convenient location is more important to them than the brand of coffee chain, operators can still capture consumers’ attention through qualities other than price. For example, two in three users think that quality is the most important decision-making factor when choosing where to buy hot drinks, whilst nearly half disagree that they usually choose the cheapest venue. However, with so many brands trading off of a quality positioning, operators have to ensure that they are differentiating themselves on additional levels, hence the trend towards lifestyle branding in the wider eating out market (Mintel 2012). Costa Coffee’s reputation for excellence applies not only for the exceptional coffee but also the insistence on perfect service. â€Å"Recruiting and retaining highly motivated and talented people is essential and great emphasis is placed on improving the skills, expertise and 9 10 The Marketing Profession performance of our people through award winning, industry-leading training and developing programs† (Mintel 2012). 11. Costa Coffee’s attitude towards environmental issues Consumers are extremely careful about environmental issues, trying to buy environmentally friendly food and drinks. Most of the customers feel that it is their duty to save the environment in order to live healthier. That is why most companies are under a lot of pressure to change their attitude towards the environment most often related to greener, packaging solutions, recycling and many others. Costa Coffee is the first UK coffee chain buying beans from Rainforest Alliance Certifiedâ„ ¢ farms. From October last year, almost 100% of the coffee beans for Mocha Italia blend are from certified sustainable farms. Costa Coffee is also a member of UK Paper Cup Recycling Committee, their cups are made from sustainable sources and that’s saves about 1,100 trees a year. The ingredients from which the cups are made of are all from iconic recyclable material and are made using only certified sustainable pulp. Vegetable Costa Coffee is also concerned about its coffee-growers and in 2006 it registered a Costa Foundation, dealing with the improvement of the welfare of coffee-growing places like Colombia, Costa Rica, Ethiopia, Guatemala, Uganda and Vietnam. Costa Coffee is also a partner with Cafechurch network, supporting local community. The organization deals with environmental issues, fair trade, divorce and stress problems and others. People are feeling well, being part of a great atmosphere, live music, good communication, and a lot of interviews, having the opportunity to understand more about the Costa Coffee Foundations. 12. The competitor’s CSR activity Costa Coffee is not achieving basic standard of Corporate Social Responsibility (CSR). The coffee company does not give a specific data for the carbon footprint. Its environmental data is part of the environmental data of its parent company-Whitbread. 13. What is your attitude to CSR/environmental issues going to be? The aims that Costa Coffee manages to do are quite a lot. Some of the first ones are: †¢ †¢ †¢ †¢ Developing Costa Coffee’s energy & environmental strategy. Managing carbon reporting and ensuring compliance for CRC. Maintaining the ISO50001 system. Working with manufacturer’s waste contractors and NGO to improve takeaway cup recycling. 10 11 †¢ †¢ The Marketing Profession Developing Costa Good Together CR programme . By 2012/13 Costa Coffee aims to help 15, 000, providing them access to education. That target will help to bring together the communities, helping adults to find jobs and trades. The coffee chain aim is to raise ? 750,000 alone during 2012/13. Costa Coffee will try to dedicate Energy & Environment Manager in Costa Coffee. That will be useful, trying to insure more control and to organize the best structured plan for the company. Costa’s cardboard cups are not recyclable, even though the cardboard can be recycled. The other ingredient in the cardboard cups, the ink and the glue, cannot be recycled. The target environmental plan of Costa Coffee is to use vegetable ink and degradable glue on its cups. Costa Coffee is raising money to build schools in regions where a lot of coffee farms take place. There are already 22 schools in developing countries. That makes a big difference for a lot of young people who have the opportunity to study. Costa Foundation is also taking care for the supplement of special healthy nutritious meals and laptops for the children. †¢ †¢ †¢ 14. Conclusion Based on the researches and analysis that have been done BESO has a great potential to use Costa’s disadvantages and to convert them into our opportunities for prosperity. Offering similar products as those of Costa Coffee but on lower prices and in the same time launching our own products (BESO’s cupcakes) is a good strategy to gain a competitive advantage. Slight changes in the interior design of our cafeteria would be refreshing and a good way to attract new customers. Furthermore increasing our advertising activities would be an opportunity to remind our customers and in the same time to inform our new potential customers about BESO’s fantastic services and great value for money. 15. References Baker S. (2003), New Consumer Marketing, West Sussex, John Wiley & Sons Ltd Cooper D., Schindler P. (2011), Business Research Methods, New York, McGraw – Hill Education Economics Help (2008), Costa Coffee UK and Sales Techniques. Available at: http://econ. economicshelp. org/2008/08/costa-coffee-uk-and-sales-techniques. html [Accessed: 20th March 2012]. Government of Alberta (2012), Methods to Price Your Products. Available at: http://www1. agric. gov. ab. ca/$department/deptdocs. nsf/all/agdex1133#competition [Accessed: 20th March 2012] Jobber D. (2010), Principles and Practice of Marketing, London, McGraw – Hill Education 11 12 The Marketing Profession Kotler P. , Armstrong G. (2006), Principles of Marketing, The United States of America, Library of Congress Cataloging-in-Publication Data LinkedIn (2011), Costa Coffee Energy and Environment Manager at Whitbread. Available at: http://uk. linkedin. com/pub/ollie-rosevear/14/672/948 [Accessed: 20th March 2012] Mintel (2012), Brand Communication and Promotion. Available at: http://academic. mintel. com/sinatra/oxygen_academic/search_results/show&/display/id=59 0036/display/id=611992#hit1 [Accessed: 20th March 2012] Mintel.

Financial Aspect Of The Marketing Plan - 1400 Words

4.0 Financials This section discusses the financial aspect of the marketing plan. We will consider break-even analysis, sales forecasts, expense forecast in order to meet the marketing strategy. Break-even analysis determines the point at which revenue received equals the costs associated with receiving the revenue. Break-even analysis calculates what is known as a margin of safety, the amount that revenues exceed the break-even point. This is the amount that revenues can fall while still staying above the break-even point. Expense forecasts are mostly for staff required to do the marketing activities such as advertisements, web site developments, providing printed materials. 4.1 Break-Even Analysis The break-even analysis for†¦show more content†¦The area on the right after the break-even point is the profit area, whereas the area on the left before the break-even point is the loss area. TABLE 4.2 Break-Even Analysis Volume Fixed Costs Variable Costs Total Costs Total Revenue Profits 100 $5,680.00 $360.00 $6,040.00 $1,999.00 -$4,041.00 150 $5,680.00 $540.00 $6,220.00 $2,998.50 -$3,221.50 200 $5,680.00 $720.00 $6,400.00 $3,998.00 -$2,402.00 250 $5,680.00 $900.00 $6,580.00 $4,997.50 -$1,582.50 300 $5,680.00 $1,080.00 $6,760.00 $5,997.00 -$763.00 347 $5,680.00 $1,247.59 $6,927.59 $6,927.59 $0.00 400 $5,680.00 $1,440.00 $7,120.00 $7,996.00 $876.00 450 $5,680.00 $1,620.00 $7,300.00 $8,995.50 $1,695.50 500 $5,680.00 $1,800.00 $7,480.00 $9,995.00 $2,515.00 550 $5,680.00 $1,980.00 $7,660.00 $10,994.50 $3,334.50 600 $5,680.00 $2,160.00 $7,840.00 $11,994.00 $4,154.00 650 $5,680.00 $2,340.00 $8,020.00 $12,993.50 $4,973.50 700 $5,680.00 $2,520.00 $8,200.00 $13,993.00 $5,793.00 750 $5,680.00 $2,700.00 $8,380.00 $14,992.50 $6,612.50 800 $5,680.00 $2,880.00 $8,560.00 $15,992.00 $7,432.00 850 $5,680.00 $3,060.00 $8,740.00 $16,991.50 $8,251.50 900 $5,680.00 $3,240.00 $8,920.00 $17,991.00 $9,071.00 950 $5,680.00 $3,420.00 $9,100.00 $18,990.50 $9,890.50 1000 $5,680.00 $3,600.00 $9,280.00 $19,990.00 $10,710.00 4.2 Sales Forecast iLoveMyWater forecasted optimistic sales scenario for