Assignment 1 Making Decisions Based on Demand and Forecasting

Topics: Pizza delivery, Regression analysis, Domino's Pizza Pages: 10 (1419 words) Published: October 6, 2013


Making Decisions Based on Demand and forecasting
Domino’s Pizza
Assignment 1

Professor :

COURSE NAME:
ECO 550: Managerial Economics and Globalization

October 27, 2012

Assignment 1: Making Decisions Based on Demand and Forecasting

1. Report the demographic and independent variables that are relevant to complete a demand analysis providing a rationale for the selection of the variables.

According to bundle website (2012), business is defined as normally Domino’s has made gains in three key measures: 1)Penetration i.e. the percentage of all households in the US that has ordered at least once from Dominos in the last year (last year Dominos delivered to 14% of all homes!), 2)The frequency with which a customer re-orders (about once per month), 3)The average value on the receipt ticket from each order (typically around 23)The demographic of Domino’s Pizza in my community at the following; Demographics of dominos’ pizza customers in zip code 20814 where I live ; You are more likely to see these groups of people at Domino’s pizza than in other local restaurants.

Location: 30% of Domino's Pizza customers reside in zip code 20814, 79% are from Montgomery County, 83% are from Maryland, and 17% are from out of state.

The majority of customers spend a total of $16-35 per transaction, and the typical (median) total cost is $23. Total cost includes taxes and gratuities, and does not account for party size.

2. Using Excel or other calculation software, input the data you collected in criterion one to calculate an estimated regression. Then, from the calculation provided, interpret the coefficient of determination, indicating how it will influence your decision to open the pizza business. Explain any additional variables that may improve the coefficient of determination.

Table 1. Sample data: The demand of domino’s pizza
Zip Code
Y
X1
X2
20002
20
23
30
20003
17
22
85
20005
19
20
30
20007
57
22
125
20009
25
22
20
20011
21
21
30
20016
16
22
125
20019
23
28
30
20032
39
26
20
20740
43
16
125
20743
31
21
65
20747
25
19
65
20781
20
23
45
20783
31
20
30
20814
57
23
125
20816
78
24
125
20852
47
22
65
20901
25
21
65
20902
8
20
30
20906
18
19
30
20910
16
20
45
21207
20
18
30
21208
13
18
45
21222
30
22
30
21224
36
21
30
21227
16
18
45
21237
35
17
65
22204
18
20
65
22206
22
20
65
Y = The percentage of people in the zip code who buy domino’s pizza X1= Price of Pizza (Median cost)
X2= Income of customers who buy Domino's pizza (in K)

To estimate the demand of a particular good or service, first determine all the factors that might influence this demand. I wanted to estimate the demand for Domino’s pizza by person who live in Bethesda, Maryland by conducting a survey of thirty randomly selected zip codes area where have a domino’s pizza shop in my community, Maryland during a particular month. Suppose I have gathered the following information for each zip code from this survey: 1) Domino’s customer who lives in by 30 zip codes area, (2) average of domino’s pizza per box, 3) the percentage of people making X2 income that buy dominos pizza, and 4) Income of customers who buy Domino's pizza. The data obtained from my website survey are presented in Table 1. The reasons for selecting these variables are based on economic theory of demand. However, it should be clear why the price of domino’s pizza, average income, and average customers buying pizza, were selected for this study. Among the software package used by economists to conduct a regression analysis of the demand for a good or service are SPSS, SAS, and Micro TSP. To estimate the demand for pizza, I employed the regression function contained in Excel. Although, it only contains the basic elements of...

References: Bundle unbiased, data-driven rating (2011). Domino’s pizza company. Retrieved on October 24, 2012 from http://www.bundle.com/merchant/detail/dominos-pizza-bethesda-md-3811080/#customers
Dean. G. (2010), Domino pizza beyond the dough. Retrieved on October 26, 2012 from http://marketography.com/2010/03/09/dominos-pizza-beyond-the-dough/
Franchisedirect.com(2010), Pizza franchise Industry report. Retrieved on oct,26 2012 from http://c1176552.r52.cf0.rackcdn.com/pizza-franchise-industry-report.pdf
McGuigan, J. R., Moyer, R. C.,& Harris, F. H. D. (2008). Managerial economics: Applications, strategy, and tactics (12th ed.). Mason, OH: South-Western Cengage Learning
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