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UNIVERSITY OF DERBY

The Derby Business School

Module Name: Improving Business Performance


Module Code: 6LO500
Program me: BA (HONS) in Business Administration

Module Assignment: Improving Business Performance

Prepared For:

SABREEN SIRAJ

Module Leader, University of Derby

Prepared by:

Mahfuzur Rahman Shaek

ID-100437227
Improving Business Performance

Main Body: 2997

Total Word: 3496

Date- 07/05/2017

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Executive Summary
Raisin's is a contemporary restaurant in Uttara. They are in operation for last 9 years but recent
decline in sales and profit has prompted them to make some amendments in how they operate.
They are seeking ways to improve its operational performance. This reports outlines the options
Raisin's has to recover its sale & profit growth by achieving operational excellence. Theories, tools
and techniques available in Operations management can help them to achieve their goals.

Three improvement areas are identified in this report . They are renovating to improve and
modernise the appearance to attract customers, New software to improve supplier management
and Menu development to offer more variety. All these areas are carefully analysed to understand
the situation better. These improvement areas then analysed using 2 appraisal methods. Renovation
are suggested to be the best project to undertake considering the current business position of
Raisin's, their competitors and current customer trends.

Renovation Project will be more suitable for radical change approach than continuous improvement.
Some criteria of radical change such as high investment, major and dramatic changes, process
redesign for survival as well as structured approach for change suggests Radical Change is more
suitable.

Renovation Project associated with many risks. Risks are identified and analysed carefully to create a
risk response plan. Draft plans are then amended considering the risk factors identified and analysed
using qualitative and quantitative analysis methods.

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Table of Contents
Executive Summary................................................................................................................................. 3
1. Introduction ........................................................................................................................................ 5
Financial Status of Raisin's .............................................................................................................. 5
2. Improvement Areas- ........................................................................................................................... 5
A. Renovation .................................................................................................................................. 5
B. New supply management software ............................................................................................ 6
C. New Cuisine development/Existing Menu Improvement........................................................... 6
3. Investment Appraisal Methods........................................................................................................... 7
4. Management Approaches................................................................................................................... 8
5. Project Activities ............................................................................................................................... 10
6. Risk Management ............................................................................................................................. 12
7. Final Project Plan............................................................................................................................... 16
Conclusion ............................................................................................................................................. 22
References: ........................................................................................................................................... 23
Appendix ............................................................................................................................................... 24

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1. Introduction
Raisin's is a restaurant located in residential area of Uttara. They are operating successfully
for last 10 years. Recently there has been a decline in sales due to increased competition
from other restaurant sprung up locally. These restaurants are innovative with new ideas
and decorated with modern facility. Management of Raisin's must act quickly to sustain in
business competition.

Financial Status of Raisin's

2015 2016
Sales 3125570 2869600
Cost of sales (food & 968920 889570
Beverages)
Salaries & Wages 432700 422500
Rent/Lease 204000 216000
Direct Operating Expenses 250050 229500
Marketing/Promotion 52430 51810
Utility(Energy, telephone) 57000 59090
Repairs & Maintenances 24590 29760
Others (Administrative, 97480 94880
Insurance, Dhaka City
corporation tax etc.)
Total Gross profit 1038400 876490
*National Board of revenue(Tax) info not available to calculate Net Profit.
Figure 1: Financial Statement of Raisin's for last two Years

2. Improvement Areas-
A. Renovation
Raisin's has a declining sales and profit growth. In restaurant business three things has to be
right before it can be successful - Location, Inviting internal atmosphere and good food.
Relocating may not be viable but Raisin's can certainly interior by renovating.

Currently the restaurant has a capacity of 48. Which is not fulfilling the demand in rush
hours. Management has a plan to increase that capacity to 60 by optimizing floor space and
changing layout. Current kitchen lay out also not very effective, productive and efficient.
Management anticipating a new lay out, once rebuild, will improve productivity with greater
sales volume.

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Last major changes took place in 2007 when it's started operating. Business competition and
customer demand has changed dramatically. To sustain profit and growth, management
must bring some changes. They have plan to create a Hollywood theme restaurant as there
is a growing trend among young generation that they prefer themed restaurant than a
traditional one.

Any major renovation means closing down the business temporarily. That may result in loss
of regular loyal customer. Also loss of revenue for the days it remained shut for renovation.
it is estimated that it will require 3 months to complete the renovation. A big amount of
investment required. This is also require to consider that future potential growth that
outweigh expenses/investment.

B. New supply management software


Currently the restaurant do not have any organised raw material supply system. They buy
ingredient from different buyer every day. This is costing them more and often find
themselves running out of goods. A new restaurant management software that combine all
the functions of sales, invoicing, accounting with Supply management.

Incorporating a supply management software with existing Restaurant Management


software can see raw material supply more organised, efficient and cost saving.
Management has decided to contract with reputed supplier so that they get always best
price. Also they are considering to reduce the number days they receive supply in a week.
That will save transport cost and time spend on dealing with goods receiving. Also will
implement an effective inventory management system. So that they are always aware of
raw materials availability and will reduce the chance of running out.

Although relying more on technology may reduce effort and increase efficiency.
Nonetheless a technical glitch or down time may complicate or make it even worse.

C. New Cuisine development/Existing Menu Improvement


Since the management has decided to renovate with Hollywood theme it is only justified
that they include western fast food Items e.g. burgers, fries. Addition to that they will
review their pricing strategy on their existing menu. Customer is always looking for value.
Management has decided to review and modernise existing menu items to create more
value for their customer.

However, people reluctant to changes and some traditional customer who might not
appreciate the changes. Adding new menu items may see the cost rising, adds complexity to
operation and may require more resources.

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3. Investment Appraisal Methods
Literature Review
Project appraisal Slack, Lester, Roger and Gö tze, Meredith Maylor,
methods 2013 2007 Duffy, 2012 Northcott et al, 2003
and 2015
Schuster,
2015
Non-financial
methods
Feasibility, √
acceptability,
vulnerability
Prioritisation Matrix √
Important √ √
performance Matrix
Financial Methods
Payback Periods √ √ √ √ √
Net Present Value √ √ √ √ √ √
Return on investment √ √
Internal rate of return √ √ √ √
Discounted Cash Flow √ √ √ √ √
Profitability Index √
Benefit Cost Ratio √
Figure 2:Literature Review- Appraisal methods

Prioritisation Matrix
These three indentified improvement areas have to be appraised using one of those
techniques mentioned above. Management of Raisin's has decided to Prioritisation Matrix
methods to be one. In this technique projects are scored using some analytical factors to
prioritise based on overall score. Project with lowest overall score are the go to project.
Figure 3 shows Renovation project is less vulnerable.

Factors Renovation Supplier Menu


(Project A) Management Improvement Scored in a scale of 1-5
Software (Project C) 1= least impact.
(Project B) 3= medium
Budget 4 3 3 5= most impact
Cost reduction 1 3 4
Customer Satisfaction 1 4 2
Quality 1 2 3
Flexibility 3 2 3
Time 3 2 2
Risk 4 2 3
Total 17 18 20
Figure 3:Feasibility, Acceptability and Vulnerability method

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Importance performance matrix
This investment appraisal categories projects based on what is more important to
customers and what is the performance in that aspect against competitors. Figure 4 shows
Project A being in the position of Urgent action. Importance-performance matrix showing if
there is an 'excess' and less needs to be done, whereas urgent action is needed if
performance is worse than competitors in an highly competitive area of Uttara, where many
eateries sprung up lately.

Figure 4: Important Performance Matrix methods

Chosen Project: Renovation


After careful analysis using two Investment appraisal methods, it can be concluded that Renovation
project is more viable to undertake. Renovating has a long term prospect. It will laid the foundation
for future survival. However customer taste and preferences are constantly changing. What it seems
more logical and appropriate now, may soon be proved wrong.

4. Management Approaches
How this project will be handled depends on determining type of change required. Business
improvement can be continuous or Radical change.

Radical Change/ Business Process Reengineering(BPR):


Radical Change also referred as Break through improvement is a major and dramatic change in
operation to improve performance(Slack, 2015). Many improvement initiative doesn't success,
because they simply try to add technology to automate the same old process (Hammer, 1990).

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Continuous Improvement:
Continuous improvement is a small and incremental improvement in operational performance that
emphasis on the momentum of improvement rather than the pace (Slack, 2015). Continuous
improvement is also referred as Kaizen, which is a Japanese terms for continuous improvement.

Kaizen eliminates Wastage by doing small and basic things right and gradually improve performance
to meet customers need(Imai, 1986). Kaizen also helps boost employee morale (Maylor, 2003).

Radical Change vs. Continuous Improvement


Radical Change (Kaikaku) Criteria Continuous Improvement (Kaizen)
Rapid process re-engineering Change type Gradual improvement of Business
Aggressive change Aim Small changes in every process to make a difference
Structured and Disciplined Approach Non structured
Whole system or relations in Focus Parts of a system
Systems
Process re-design for survival Reason Improving performance
High Risk Moderate
Broad, Cross Functional Scope Narrow, within process
High Investment Low
Figure 5: Difference between radical change and continuous improvements(Slack, 2015) (Maylor, 2003)

Highlighted criterions are matches with the chosen project to refurbish the business. These criteria
suggest Radical change would be more suitable approach for this project.

Also Figure 6 shows Renovation is highly placed in terms of business needs and readiness to accept
any change. So this project is critical, can be undertaken now and likelihood of success is also high.

Figure 6: Deciding Radical Change approach (Belmonte and Murray, 1993)

"Electric Light did not come from continious improvement of Candles"

- Oren Harari, Professor, University of San Francisco

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5. Project Activities
5.1 Planning
Planning stage involve carrying out feasibility study of the desired improvement area by a
cost benefit analysis. Market research will be completed along with a estimated budget.

5.2 Design
Design process includes determining what to accomplish, measurement of current lay out
and the issues currently have. Then draw a Working Plan as well as build a prototype based
on what the final deliverable will look like. Test and redesign if required.

5.3 Secure Loan/Finance


Any projects require funding. Many lending firms available in the market. Choosing the right
one which offers best interest rate and easier term & conditions is main objective in this
activity. Signing the agreement and sanctioning the fund upon approval.

5.4 Hire Builder/interior designer/plumber/electrician


Hiring the specialist tradesman for selected area will be completed in this activity. Hiring
process may be similar but the selection criteria will differ from one another.

5.5 Buy equipment/materials


Indentifying the supplier for equipment and materials supply. Once best supplier have been
contracted, place a purchase order. Payment has to be made after receiving goods. But they
have to pass the quality criteria before that. Finally invoices has to be documented and
inventory has to be updated.

5.6 Business closure for renovation


Close business operation for renovation and deciding if any employee needs to be
terminated or anyone willing to take unpaid leave for the duration of the project. Also
determine any hiring requirement after renovation completion. Close the business day on
due date.

5.7 Construction Works


Selected builder will carry out repair and rebuilding works. If any item will be used after
renovation are preserved. Once completed, it will be reviewed and audited by the
management. A preventative maintenance plan will be drafted and payment will be made.

5.8 Interior Works


Interior work will include design, decoration, painting walls and store front design.

5.9Kitchen Area
This activity mainly involves reorganisation to increase productivity and efficiency. There will
not be any major rebuilding work. Some old equipment in kitchen area will be replaced with
new modern ones. Such as, old exhausts vent will be replaced with more energy efficient
and eco friendly HVAC (Heating, Ventilation and Air Conditioning).

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5.10 Grand Opening
Advertising locally for informing and inviting customers about newly refurbished restaurant.
Staff briefing on changes has been made. A dress rehearsal also can be completed to
familiarise staffs with new layout. Finally project success will be celebrated.

Figure 7 :Project Activities

Figure 8: Project Resource Sheet

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Figure 9: Project information

6. Risk Management
Risks probabilities can be determined by using probability theory, statistical analysis or from
past experience/ judgement. (Duffy & Rogers, 2012)

6.1. Literature Review


Project Risks can be categorised by time, cost and quality. Risk can be managed efficiently in
three steps- identify the risks, Risk Analysis and Risk monitoring & response. Managing risk
is a continuous process. it requires detailed planning and identifying the possible risk
associated with the project. Identified risk then has to be analysed carefully to determine
likelihood, seriousness, and impact in the project. (Maylor, 2003)(PMI, 2000)

Risks can be analysed in 2 ways- Qualitative and Quantitative. Many methods has been
developed over the years to manage risk. Notably, Failure Mode and Effect Analysis(FMEA)
is a structured approach to indentify, prioritise and better management of risks through a
scoring system. FMEA can applied in any project following six steps-

1. List ways the project possibly be a failure.


2. List the consequences of each possibilities and rank the according to Severity(S).
3. List all the cause and their likelihood of repetition. Rank them according to likelihood
of reoccurrence(L).
4. Estimate the ability to detect the risk. Again, rank them according to detectability(D).
5. Calculate the Risk Priority Number(RPN) by multiplying S, L and D together.
6. Find ways to reduce the risk associated with failures, beginning with high RPNs.
(Meredith et al, 2015)

Risk Response Planning


Once risks are identified and analysed carefully it then can be responded in 5 ways-

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Risk Avoidance: Some risks can be completely avoided by simply planning ahead or taking
corrective measures. It acts as risk prevention or risk removal by changing the plan.

Risk Mitigation/Reduction: Some risks cannot be avoided, it will occur. But impact can be
minimised by proper damage reduction plan.

Risk transfer- Risk can be avoided by transferring it to a third party.

Risk acceptance- When risk cannot be mitigated or reduced, it is just documented wait for
the events to take place.

Risk deferral- Postpone the project to a date when a certain risk is less likely to occur.

Qualitative Risk Analysis


Quality of risk is high or low determined based on possibility of happening and severity it
will have os the project. Figure 10 shows how risks are defined in Qualitative terms
(Extreme, High, Moderate and Low). (Maylor, 2003)

Figure 10: Qualitative Risk Assessment matrix

Based on Risk assessment matrix risk identified in this project can be ranked in qualitative terms
shown in the Figure 11 below-

Identified Risks Risk Factors Chances Impact Qualitative


terms

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Communication  Conflict between team members Likely Minor High
 Miscommunication
Dhaka Metro  Business has to close down if it fails Unlikely Catastrophic Extreme
Project in route of proposed metro project.
Cost  Initial estimates were low. Moderate Moderate High
 Material price increase
Scope  Activities not logically put Moderate Minor Moderate
 Missed activities
Project  Failure to follow a methodology Unlikely Moderate Moderate
Management  Lack of control
Resources  Inadequate resources Likely Major Extreme
 Over allocation of resources
Technical  Project team do not have Unlikely Minor Low
Difficulties Technological knowledge to run
this project
Supplier  Low quality materials/equipment Moderate Major Extreme
 Failed to meet deadline
Builder  Low quality Work Moderate Moderate High
 Not meeting deadline
Figure 11: Level of identified risks

Quantitative Risk Analysis

Risks are rated with 1 to 5.

In case of likelihood 5 represents the most possibility of the risk occurrence and 1 represents the
least. Potential severity are rated based on 5 being the catastrophic and 1 being the less or
insignificant/minor impact. Also ability to detect rated as 5 is very difficult to detect and 1 is easier.

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Category Risk Event Cause Effect Likelihood Potential Difficulty Risk Mitigation
(L) Severity of Priority
(S) detection Number
(D) (LxSxD)
Time Political Political situation of Delays/halts the 2 4 5 40 Risk acceptance
Instability the country is fragile project
Critical task Technical difficulties Delays the project, 4 2 3 24 More emphasis on design and
delay delays the task cost increase planning stage
Scheduling error Over allocation of Adds complexity in 2 2 4 16 Hire more resources
resources Project
Interruption in Load shedding in Delays the project 5 4 5 100 Buy a backup power generator
Electrical Supply national power supply
Cost Budget Increase Initial estimates were Increase the cost 2 3 3 18 Add buffer cost in initial budget
low
Additional Work Scope of Work has Increase cost and 2 1 3 6 Careful analysis of situation at
increased delays the project planning stage.
Poor quality Not maintaining Rework increases the 3 3 3 27 Introduce Quality management
quality control cost plan
Material cost Price increase in the Project cost increase 3 2 3 18 Add buffer cost in initial budget
increase market
New tax/ vat New Vat/tax rule Cost increase 2 2 4 16 Acceptance
imposed by
government
Performance Natural Disaster Earthquake, cyclone, Natural calamities 2 4 5 40 Be prepared to minimise impact
heavy rain fall delays/ damage the
project
Team conflict Personal clash within Delay or failure of the 2 3 4 24 Have a proper communication
the project project plan.
Resource Under estimated Completion delay or 3 4 2 24 Hire adequate resources
constraint resource planning poor quality
Figure 12: Failure Mode and Effect Analysis(FMEA) approach

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Risk Action Plan
Communication plan and quality management plan has to be included to eliminate the risk of team
conflict and the quality risks. Also indentifying critical path carefully at planning phase may reduce
the possible delay in the project.

Budget has to consider the factors that material cost may rise due to inflation or various other
reasons. Careful estimation of budgeting may reduce the difference between initial and actual final
cost.

Bangladesh do not produce enough electricity to meet its demand. Therefore power load shedding
will disrupt the progress. A backup generator must be included in the equipment purchase list for
uninterrupted project progress.

There may be shortage of resources and over allocation of resources can happen. This can be
eliminated by taking on more resources which will increase the cost. Increasing the project duration
can also solve the issue. However this increase the cost too and delays the project at same time.
Finding the right combination resource increase and duration will be worthwhile.

Natural calamities is something out of human control and cannot be anticipated. A proper plan can
be documented how the after events likely to be evolved. Proposed Dhaka Metro rail project can see
the this renovation project a failure, if falls on metro route. Draft plan of metro route shows it will be
very close to the restaurants. Risk will arise only if there is any changes. If not, it may be a positive
events. This will increase revenue for being very close proximity to the metro station.

7. Final Project Plan


Screenshots from Final Plan created using MS project 2013 are provided below-

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Project Resource Sheet

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Conclusion
Corrective actions taken after risk assessment, may have increased the cost significantly as well as
prolonged the project duration. But it is necessary for smooth project progress, staff morality,
project control and even successful completion of the project.

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References:
Belmonte R., and Murray R., (1993), Getting Ready for Strategic Change : Surviving Business
Process Redesign, Information Systems Management vol. 10(3) p23-29

Chopra, S., Meindl, P. and Kalra, D.V. (2012) Supply chain management: Strategy, planning,
and operation.5th edn. New Delhi, India: Pearson Education India.

Gö tze, U. Northcott, D. and Schuster, P.(2015) Investment Appraisal. 2nd ed. Berlin: Springer
Berlin.

Hammer, M. (1990). Reengineering Work: Don’t Automate, Obliterate. [online] Harvard


Business Review. Available at: https://hbr.org/1990/07/reengineering-work-dont-automate-
obliterate [Accessed 3 May 2017].

Imai, M. (1986). Kaizen – The Key to Japan’s Competitive Success. 1st ed. New York:
McGraw-Hill.

Kerzner, H. (2003). Project Management: A Systems Approach to Planning, Scheduling, and


Controlling. 8th ed. Hoboken, NJ: J. Wiley.

Lester, A.(2007) Project Management, Planning And Control. 5th ed. Amsterdam:
Elsevier/Butterworth-Heinemann

Maylor, H. (2003). Project management. 3rd ed. London: Pearson Education Ltd.

Meredith, J., Mantel, S., Shafer, S. and Sutton, M. (2015). Project Management: A
Managerial Approach, Ninth Edition International Student ed. Hoboken NJ: John Wiley &
Sons.

PMI (2000). A guide to the project management body of knowledge (PMBOK guide), 2000
edition. Newtown Square, PA: Project Management Institute.

Rogers, M and Duffy, A.(2012) Engineering Project Appraisal. 2nd ed. Oxford: John Wiley &
Sons, Ltd.

Slack, N., Brandon-Jones, A. and Johnston, R. (2013) Operations Management. 7th ed.
Harlow: Pearson Education Ltd.

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Appendix
Draft project plan created in MS project 2003-

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-----The End-----

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