1008GBS Business Decision Making

T1 2022

ASSIGNMENT 2 – Harley Davidson Case Study

STUDENT NAME Rachel Eddy
STUDENT ID S5088025
WORKSHOP DAY Wednesday WORKSHOP TIME 10am

QUESTIONS
Question 1
Total Revenue: $ 2,052,092
In-Store Revenue: $ 1,339,000
Online Revenue: $ 713,093

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 1008GBS Business Decision
Making
Question
Average Expenditure on Motorcycle (in-store $ 25,518
customers):
Average Expenditure on Motorcycle (online $ 25,370
customers):

Average Customer Spend on Motorcycles: In-Store vs Online

$25,600

$25,518
$25,500

$25,400
$25,370
Expendatu

$25,300

$25,200

$25,100

$25,000
In-store Online
Purchase Modality

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 1008GBS Business Decision
Making
Question 3
Average $ 2,378
Expenditure
on Gear (in-
store
customers):
Average $ 4,342
Expenditure
on Gear
(online
customers):
Jacobi sees these
figures and Below is a chart that compares the projected average expenditure on gear for In-store
thinks there is an
opportunity. He
(blue) and Online Customers (orange). These values were calculated using the
can make a one- forecasted growth from Jacobi following a $10,000 investment in either shopping
off $10,000 modality.
investment in
EITHER his store
or his website to 5 year Projected Average Customer Spend on Gear In-store vs
increase the Online Following Investment
selection of gear $8,000
products
$7,000
available. He
projects investing $6,000
$10K in his store
will increase $5,000

average in-store
Projected Average

$4,000
gear sales by In-store

15% each year $3,000 Online

for the next 5

$2,000
years.
Alternately, he $1,000
projects investing
$0
$10K in his
2022 2023 2024 2025 2026 2027
website will Year
increase average
online gear sales Chart 1
by 10% each year
From the above chart, it is obvious that average expenditure per sale in the online store
for the next 5
years. Jacobi is significantly larger than when a customer is shopping in-store. Following the
sees these projected growth, the margin between the two shopping experiences diminishes.
figures and Jacobi predicted that should he invest on his in-store experience, average sales would
thinks there is an increase at 15% over the next 5yrs compared to a 10% growth over the same period on
opportunity.
his average online sales. The online average is forecasted to reach $6,993 in 5yrs, which
Using the
available data to is a growth of $2,651 per sale. Whereas in-store average sales are expected to grow to
provide evidence $4,783 which is an increase of $2,405. As displayed above, the average expenditure on
for your gear online is significantly higher than when purchasing in-store. However, in-store
recommendation sales increased 101% compared to a 61% increase online during the same 5yr period,
, where should
which is depicted in Chart 2 below, where the in-store sales increase at a much faster
Jacobi invest his
$10K to gain rate than the online store. Total return on investment for online average online sale is
maximum value $2,651, higher than that of in-store which had an average sale of $2,405
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 1008GBS Business Decision
Making

Forecasted Change in Average Expendature on Gear per Year

Following Investment: In-store vs Online
$700

$600

$500

$400
Amou

$300

$200

$100

$0
22-23 23-24 24-25 25-26 26-27
Time Period (Years)

In-storeOnline

Chart 2

Considering the above information and the information provided by Jacobi, I would
recommend he invest the $10,000 in the online site for Harley Davidson NY. Investing in
the online store provides greater returns on the average expenditure per gear sale
online ($2,651) and has a higher gross profit value ($6,993). Further there is the
potential to reach a much larger audience when having a strong online presence, thus
investing in having a more compressive e-commerce store should remain a priority.
Something to take into consideration is that the total percentage increase in average
online sale was lower than the average in-store sale. This may allude to potential
growth in average instore sale amount, that could exceed the average online spend in-
time. However given the current parameters and societal trends, I would recommend
investing in the online platform.

Question 4
Hypothesis testing
 In the spaces below, complete each step of the Six-Step Process of Hypothesis Testing
 Include the necessary information for each step

Step
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 1008GBS Business Decision
Making
(set up null and
alternative hypotheses) H0:  =
$375 HA: 
> $375

Where
H0 represents the Null hypothesis
HA represents the Alternative hypothesis
 represents the population mean being the average price the
population of customers will pay for the new item
Step 2 As the population standard deviation  is unknown, a t-test statistic
(determine test statistic will be used.
and formula)
x´ −❑0
t=
s / √n

Step 3 Hypothesis test is to be conducted to 5% significance level

(specify the alpha)  = 0.05

Step 4 Reject H0 if the t-test statistical value is > t-critical value

(define decision Do not reject otherwise
rule)
t-critical value = 1.6590
 Reject H0 if the t-test statistical value is >
1.6590 Do not reject otherwise

Step 5
(calculate test statistic)

t-test statistical answer = 1.42

t-critical value = 1.6590
Step 6 H0 is rejected as 1.42 > 1.6590
(answer research  There is sufficient evidence at 5% significance level that customers are
question) willing to pay more than $375 for the new type of motorcycle headset
camera, thereby it is viable for Jacobi to stock this item.

I too believe that customers are willing to pay at least $375 for this product,
and as such I would recommend that Jacobi stock this product. This
recommendation has been made as it has been determined that 95% of
customers will pay at least $375, which aligns with Jacobi’s minimum profit
margin of 37.5%.

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