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Bell Computer Expansion Sample Essay

Bell Computer Expansion Sample Essay.

Bell Computer Expansion Sample Essay

Bell Computer Expansion and Kyle Re-Order Point

University of Phoenix

QNT571

December 25, 2019

Bell Computer Expansion and Kyle Re-Order Point

Usually, business growth drives their operations and success. Organizations of any size may require an efficient strategy of expansion to boost their processes. In essence, expansion enables businesses to increase the revenues that they generate. It would also be easy to explore and exploit new markets. The business managers must use some mathematical formulae such as standard deviations and mean to come up with informed decisions on the techniques for expansion, as well as to re-order commodities. The decisions made will be based on the values obtained from calculations.

Bell Computer’s Case

Formulation of Expansion Techniques

Bell Computer has two alternatives to choose from for its expansion. As such, the company will need to compute the expected values from these options so that it chooses the most profitable one. For the management to calculate the expected values, probable outcomes will be multiplied by the overall likelihood of occurrence, and then the values obtained are added up (Yoder, Visich, & Rustambekov, 2016). The result will help the stakeholders to make relevant decisions. The option will be chosen will be based on its ability to provide the most profitability and promote growth. From Bell’s case study, the option of a medium-scale requires $145 while the large scale one is at $140. The values will be computed, as evident in the table below. The business will deeply understand what the expansion strategies entail.

From the table, it is evident that the alternative of medium-scale would provide higher profit margins as compared to the large scale. Therefore, Bell Computer should consider the option of a medium-scale to expand its operations. When the profits are high, the growth of the business would also improve substantially. The medium-scale has expected profits of $145 whereas a large scale has expected profits of $140; hence the former strategy surpasses the latter by $5.

Profit Variation Calculation

Even though the expected profit margins are efficient in making business decisions, they are insufficient to formulate a plan that would prove that there will be no or less breach or risks to the business. Through the calculation of the variation in profits, the process of planning for expansion would be more accurate, and the management will understand any potential risks (Oh & Contractor, 2014). The company will have to calculate variance based on the following formula;

The medium-scale option has a variance of 2,725 in comparison to the large-scale variance of 12,400. The standard deviation for the approach of a large scale is higher compared to the one for medium scale. A high standard deviation shows high risks, whereas a low standard deviation depicts lower risks. Therefore, the medium-scale option would be the most appropriate since it has lower risks and brings higher profitability.

Kyle’s Case

Based on the scenario of Kyle, there is variation in the printer demand; hence it would require mathematical computation using the normal distribution to help understand the demand for those commodities. The average demand for the product will be calculated by summing up the average demand in each day for the number of days as the lead time shows. In each day, the product of lead time and average demand will be established. The variance will be computed by summing up the daily variance. The formula below will be used to compute the re-order point;

d= average demand for each day, L= lead time, σ =standard deviation for each day, z =summation of standard deviations

For the case of Kyle, d= 200/7 units, L= 7 days, σ =30/7, probability= 6%, service level= 0.94, z= 1.56

Therefore, re-order point = (200/7) *7+1.56*(30/7) * √7= 200+17.69 that results to 217.69

This shows that the organization will require an inventory level of 218 units for placing a given order. Variations in demand can lead to product shortages hence the need to always adequately stock products (Lynch & Jin, 2016). When the stock is safe, inventory will be available for the business. The service level of 90% would show that the firm has a probability of 0.90 to meet consumer demands. 0.1 stock probability would show some shortage.

Stock safety = z*σ*√L

Based on the values from the case, stock safety =1.56*(30/7) *√7 =17.69 that translates to 18 units

From this value, Kyle Bits and Bytes will need to maintain 18 stock units to avoid risks of shortages.

Conclusion

Expansion of enterprises provides sustainable competitive advantages as such businesses will acquire a wide base of customers. However, before expanding operations, it is essential to consider the elements of profitability and potential risks. An efficient approach for expansion should be one that would most likely provide high profits with the least probability of risks. Conversely, companies should always ensure that their stocks are kept safe to help meet the needs of all customers.

References

Lynch, R., & Jin, Z. (2016). Exploring the institutional perspective on international business expansion: Towards a more detailed conceptual framework. Journal of Innovation & Knowledge1(2), 117-124.

Oh, C. H., & Contractor, F. (2014). A regional perspective on multinational expansion strategies: Reconsidering the three‐stage paradigm. British Journal of Management25, S42-S59.

Yoder, S., Visich, J. K., & Rustambekov, E. (2016). Lessons learned from international expansion failures and successes. Business Horizons59(2), 233-243.

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