Solutions

1) What are 4 phases in a product life cycle? Draw the product life cycle and explain each
phase.

Introductory Phase
Because products in the introductory phase are still being “finetuned” for the market, as are
their production techniques, they may warrant unusual expenditures for (1) research, (2)
product development, (3) process modification and enhancement, and (4) supplier
development. For example, when the iPhone was first introduced, the features desired by the
public were still being determined. At the same time, operations managers were still groping
for the best manufacturing techniques.
Growth Phase
In the growth phase, product design has begun to stabilize, and effective forecasting of
capacity requirements is necessary. Adding capacity or enhancing existing capacity to
accommodate the increase in product demand may be necessary.
Maturity Phase
By the time a product is mature, competitors are established. So high volume, innovative
production may be appropriate. Improved cost control, reduction in options, and a paring
down of the product line may be effective or necessary for profitability and market share.
Decline Phase
Management may need to be ruthless with those products whose life cycle is at an end. Dying
products are typically poor products in which to invest resources and managerial talent.
Unless dying products make some unique contribution to the firm’s reputation or its product
line or can be sold with an unusually high contribution, their production should be
terminated.
2) With the growth of Hard Rock Cafe—from one pub in London in 1971 to more than 145
restaurants in 60 countries today—came a corporate wide demand for better forecasting. Hard
Rock uses long-range forecasting in setting a capacity plan and intermediate-term forecasting
for locking in contracts for leather goods (used in jackets) and for such food items as beef,
chicken, and pork. Its short-term sales forecasts are conducted each month, by cafe, and then
aggregated for a headquarters view. The heart of the sales forecasting system is the point-of-
sale (POS) system, which, in effect, captures transaction data on nearly every person who
walks through a cafe’s door. The sale of each entrée represents one customer; the entrée sales
data are transmitted daily to the Orlando corporate headquarters’ database. There, the
financial team, headed by Todd Lindsey, begins the forecast process. Lindsey forecasts
monthly guest counts, retail sales, banquet sales, and concert sales (if applicable) at each cafe.
The general
managers of individual cafes tap into the same database to prepare a daily forecast for their
sites. A cafe manager pulls up prior years’ sales for that day, adding information from the
local Chamber of Commerce or Tourist Board on upcoming events such as a major
convention, sporting event, or concert in the city where the café is located. The daily forecast
is further broken into hourly sales, which drives employee scheduling. An hourly forecast of
$5,500
in sales translates into 19 workstations, which are further broken down into a specific number
of waitstaff, hosts, bartenders, and kitchen staff. Computerized scheduling software plugs in
people based on their availability. Variances between forecast and actual sales are then
examined to see why errors occurred.

1. Describe three different forecasting applications at Hard Rock. Name three other areas in
which you think Hard Rock could use forecasting models.
2. What is the role of the POS system in forecasting at Hard Rock?
3. At Hard Rock’s Moscow restaurant, the manager is trying to evaluate how a new
advertising campaign affects guest counts. Using data for the past 10 months (see the table),
develop a least-squares regression relationship and then forecast the expected guest count
when advertising is $65,000.
1. Hard Rock uses forecasting for (1) sales (guest counts) at cafes, (2) retail sales, (3) banquet sales, (4) concert sales, (5)
evaluating managers, and (6) menu planning. They could also employ these techniques to forecast: retail store sales of
individual (SKU) product demands; sales of each entrée; sales at each workstation, etc.
2. The POS system captures all the basic sales data needed to drive individual cafe’s scheduling/ordering. It also is
aggregated at corporate HQ. Each entrée sold is counted as one guest at a Hard Rock Cafe.
3. Y  a  bx
Month Advertising X Guest Count Y X2 Y2 XY

1 14 21 196 441 294

2 17 24 289 576 408

3 25 27 625 729 675

4 25 32 625 1,024 800

5 35 29 1,225 841 1,015

6 35 37 1,225 1,369 1,295

7 45 43 2,025 1,849 1,935

8 50 43 2,500 1,849 2,150

9 60 54 3,600 2,916 3,240

10 60 66 3,600 4,356 3,960

Totals 366 376 15,910 15,950 15,772

Average 36.6 37.6

At $65,000; y  8.3  .8 (65)  8.3  52 = 60.3, or 60,300 guests.

For the instructor who asks other questions than this one:
r2  0.8869
Std. error  5.062