Question 4 10 points Starbucks is planning to enter the prepaid debit card marke

Question

Question 4 10 points Starbucks is planning to enter the prepaid debit card market as a means of increasing their market presence. They believe an entry into this segment can enable them to main customer contact and generate considerable value for their customers as well as themselves. After attending the executive training program on project options at COX, they have to decided to have the introduction of their pre-paid debit card broken into several stages. they believe that this staged implementation can help them minimize the risks associated with the project. Specifically, the four stages were as follows: . Stage 1: Install basic hardware and software at local store level to support simple debit card . Stage 2: Install on-line registration of cards to allow users to replace lost cards, reload cares with additional money, etc . Stage 3: Install loyalty points program, including email notification systerm Stage 4: Introduce co-branded Visa card with Bank One Sreekumar R. Bhaskaran It was estimated that each stage would take two years to implement, the cost per year and the potential gain at the end of two years from successful implementation are indicated in the table below (in SM) The conditional probability of each stage's success, given that the previous stage is successful, is also indicated in the table. If a stage fails, it is assumed that there is no gain at the end of the two year implementation period. The stages must be done in sequence if implemented (for example, you could not choose to implement only stages 1, 3, and 4) Stage Annual Estimated gain Prob. Im from of Costs (Cost/yr) Implementation success $4.8018.00 $9.00 $7.20 $4.80 0.8 $3.00 $1.20 $0.90 0.65 0.65 Starbucks used a discount rate of 20 percent for this project. For accounting purposes, assume that costs are incurred at the beginning of every year while the benefits (value) are accrued at the end of the year 1. If you were the project manager assigned to this project, would you have recommended that Starbucks' proceed as planned or modify the plan (and if so, how)?

Explanation / Answer

Firstly, let's go through each of the stages and its pros and cons in detail from Customer point of view:

Stage 1:

We need to understand the POS ( Point of Sale) system here which allows the customers to pay for Good and services. It is basically used in sales transactions, record and trade inventory.

Pros -

Cros:

Stage 2

Pros:

Cons:

Stage 3: The beauty of a digital reward system is you can reward points however you like.

Pros:

More business aims to increase their sales from existing customers and get a few new one on the door.

Thus the combination of three strategies might be a good move.

Stage 4-

These are the product of mutual partnership between the Company and Bank by which customers will get great discount and rewards from the brands they love to:

Features:

Say for example - if you go specifically for Starbucks and you hold HSBC Starbucks card, it will give you an edge over the other customers as you are entitled for exclusive sales previews, exclusive billing counters are built in for you. You can ask for home deliveries for your altered garments, earn more reward points, etc.

Pros:

Cons:

Now let's evaluate it from company point of view:

Stage- 1 -

Total cost of two years - 4.80 $+ 4.80 $ = 9.60 $

Gain accrued at the end of the year = 18 $

Apparent benefit having the chances of accruing 80% = 8.40 $ (which means chances of failure is 20%)

Stage - 2

Total cost for 2 years = 6 $

Gain accured at the end of the year = 9 $

Apparent gain having 65% chances = 3 $ (which means 35% chances of failure)

Stage - 3

Total cost for two years = 2.40 $

Gain = 7.20 $

Apparent benefit = 4.8 $

Probabilty of wining is 50 % ( high chances of failure too)

Stage - 4

Total cost for two years - 1.8 $

Gain - 4.8 $

Probability of winning is 65% and loosing is 35%

Now additionally starbucks will offer 20 % discount, therefore we can deduct the 20% of the balance amount as the company income.N

Now analyisng the situation, If there is a pain, there will be a gain.

Now a days all business are opting this methodology in competative buisnesses for future growth and customer satisfaction.

Therefore starbucks should go for this and expand its business operations by reaching lakhs of customers in this cash less economy.

Thank you.

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.