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MITS6002 Business Analytics Assignment 3 Q1. Carefully Read the “CommBank Retail Business Insights Report FY18” provided with this as an attachment and answer the below questions. i. Comment on the insights report based on the overall features; including the quality of visualisations, presentability, and the information provided. ii. List the key information you derive from this insights report and explain how they will be useful in decision making. iii. Write an abstract (one paragraph) summarising the insights report. iv. Suggest improvements to this insights report. Q2. Regression analysis is a commonly used technique to find relationships among variables. Answer the below questions based on regression analysis. i. Provide an example where regression analysis can be effectively used. ii. Collect height and weight data from 10 friends/relatives of yours and complete the below table. Every student in class should have a unique set of values. Height Weight iii. Draw a scatterplot based on above data. Based on your plot comment on the relationship between height and weight. iv. Compute the equation of the regression line. v. Calculate the R2 value and comment on the goodness of the fit. https://www.commbank.com.au/content/dam/commbank/business/pds/retail-business-insights-report-fy18.pdf vi. Use an analytics tool of your choice to calculate the values for iv, and v. Compare them with your answer. Q3 Classification and regression are commonly used processes in business analytics. i. Briefly explain the difference between classification and prediction. ii. Give examples for classification methods you know. iii. The following diagram shows a neural network with one hidden layer. Write down the algebraic equation for y1 in terms of input values i1,i2 and weights w. Briefly explain how neural networks are used for classification. iv. Give at least three examples how clustering can be used in business analytics. In your answer explain how each business case could be addressed using clustering. CommBank Retail Business Insights Report FY18. 2 Overview The Australian retail sector continues to respond to a range of competitive pressures and a desire to drive efficiencies within their businesses, to maintain or grow their performance. As a result, retailers appear to be increasingly adopting an innovative mindset to ensure they maximise available opportunities, leverage technology and enhance the customer experience. While many retailers are generating a substantial and timely return from investing in significant change within these areas, there are others yet to harness the financial and intangible benefits that innovation can deliver. State of innovation – retail industry vs national average Innovation Index – retail industry vs national average 19% 9% 16% 2% 4% 2% 30% 39% 35% 49% 48% 47% Retail FY17 Retail FY18 National FY18 Disruptors Harnessers Adopters Resistors National FY18 Retail FY18 Retail FY17 29.5 32.0 26.2 100 75 50 25 0 -25 -50 -75 -100 Innovation Active Have Not Implemented Change Abandoned Innovation Improvers (Improve But Don’t Innovate) CommBank Retail Business Insights 87% of retailers are either Innovation Active or Improvers About the Retail Business Insights Report The CommBank Retail Business Insights Report is based on a sub- set of a wide-ranging quantitative survey of 2,473 business owners, decision makers and managers, as well as 16 in-depth qualitative interviews. This sub-set comprises responses from 262 retailers within sectors including homewares and hardware, clothing and footwear, food and liquor, and other retail. The survey was conducted on behalf of the Commonwealth Bank by DBM Consultants between August and October 2017 and analysis by ACA Research between October and December 2017. Participants were drawn from businesses across Australia with an annual turnover of more than $500,000 and at least two employees. Additional analysis on this data set was conducted in December 2017 to January 2018. The CommBank Innovation Index measures 15 core elements of innovation across management capability and entrepreneurial behaviour. The index combines the results into a single numerical indicator to rank businesses on a scale from –100 (innovation restrictive) to +100 (disruptive innovation), creating the concept of an innovation curve or spectrum. For further information on our tool and methodology see page 7 of the National Business Insights Report FY18 available at commbank.com.au/businessinsights 3 State of innovation - retail channel Innovation Index – retailers by location 18% 5% 4% 7% 5% 51% 59% 20% 24% 36% 71% Bricks & Mortar Pure Play Online Multichannel Innovation Active Have Not Implemented Change Abandoned Innovation Improvers (Improve But Don’t Innovate) Metro 31.9* 2016: 27.6* Regional 21.6* 2016: 21.8* National: 32.0 National: 32.2 Regional retailers tend to be smaller, are more risk averse and have less of a focus on networking. QLD 40.6* NSW / ACT 26.5* VIC / TAS 32.0* SA / NT 29.4* WA 24.9* 2016: 25.5* All industries:30.8All industries: 26.7 All industries: 34.7 All industries: 29.4 All industries: 37.7 2016: 28.9* 2016: 30.9* 2016: N/A 2016: N/A * Caution, low base size (below n=75), results are indicative only Innovation performance While the overall rate of innovation within the Australian retail sector has remained steady over the past 12 months, we have seen a moderate uplift in the presence of entrepreneurial behaviours and capabilities that support innovation (as measured by the CommBank Innovation Index). However, despite maintaining innovation activity, and increasing adoption of many behavioural traits that foster innovation, retailers have now fallen behind the national average. It is clear that innovation activity is at its highest among multi- channel retailers, falling dramatically when you consider pure play online and even more so for bricks and mortar only operators. CommBank Retail Business Insights 71% of multichannel retailers are Innovation Active 4 While retailers have further embedded a range of behaviours and capabilities that enable innovation over the past year, they are less inclined than the average of all industries to look for and respond to opportunities, incorporate innovation into their staff hiring and evaluation processes, or be willing to take risks on uncertain ventures. The top drivers of innovation and improvement for retailers – productivity, leveraging technology and growth – align with expected benefits, with retailers focused on enhancing outcomes for customers, raising competitiveness and internal processes. However, with only a fraction of retailers looking to innovate in response to their customer’s direct feedback or observed behavioural changes, and an even smaller number innovating to stave off industry disruptors, there appears to be unrealised opportunities for retailers to leverage innovation to better adapt to change. Innovation behaviours of retailers Drivers of innovation and improvement for retailers The dynamics of innovation 68% 69% 72% 75% 78% 41% 44% 46% 47% 57% Willing to spend time as well as caital on uncertain ventures Willing to put financial security on the line and take risks for an idea Actively looking for creativity and innovation skills in the hiring process Using formal process to network outside the company Evaluating employee creativity or innovation skills as part of appraisal Cultivatin new ideas by giving employees opportunities to observe Expect employees to offer creative ideas for how the company could improve Looking for new ideas or ways to benefit from changes in the market or technology Encouraging employees to ask questions that challenge Adapting products and services to make the most of opportunities 28% 29% 30% 30% 38% 10% 10% 15% 17% Adapting products and services to make the most of opportunities Encouraging employees to ask questions that challenge Looking for new ideas or ways to benefit from changes in the market or technology Expecting employees to offer creative ideas for how the company could improve Cultivating new ideas by giving employees opportunities to observe Evaluating employee creativity or innovation skills as part of appraisal Using formal process to network outside the company Actively looking for creativity and innovation skills in the hiring process Willing to put financial security on the line and take risks for an idea Willing to spend time as well as capital on uncertain ventures Improving efficiencies or productivity Needing new avenues for growth or revenue Taking advantage of new or emerging technology and solutions Keeping up with what competitors are doing Improving the quality of offering Feedback from customers Observing changes in customer needs Changing nature of the workforce Protecting against disruptors in the market Top innovation behaviours for retailers Least prevalent innovation behaviours for retailers Top drivers of innovation and improvement for retailers Least prevalent drivers of innovation and improvement for retailers Perceived benefits of innovation and improvement for retailers Improved market position Better outcomes for customers Improved efficiencies Increased productivity Better competitive advantage 38% 35% 34% 30% 29% Challenges of innovation and improvement for retailers Lack of time dedicated to implement these changes Lack of human resources or personnel Lack of financial resources Lack of skills Difficulty quantifying the returns of investment 16% 20% 25% 28% 32% of retailers are adapting their offering to make the most of opportunities 78% CommBank Retail Business Insights 5 Areas of investment 6% 10% 11% 14% 16% 21% 31% 41% 48% 13% 18% 16% 20% 12% 16% 36% 36% 36%Sales and marketing Staff training and expertise Technology Buying or renovating premises Supply chain and logistics Modified internal management structure Customer centricity Research and development Domestic or international expansion Retail FY18 National FY18 In line with high levels of marketing activity occurring within the industry, retailers are most likely to invest in innovative sales and marketing approaches. Staff training, store renovations and supply chain enhancements are also high priorities while investment in technology, research & development and customer centricity lags behind the national average. For those retailers that are investing in technology, it is not surprising that the top priority is their website or digital presence and payment systems. Investment in the Internet of Things is also well above the national average while investment in cloud technology is significantly below. Investment in innovation Areas of investment for retailers investing in technology 7% 10% 15% 15% 16% 25% 32% 43% 51% 55%Webstie and or digital presence IT software IT hardware Payment systems Apps for smartphones or tablets Internet of Things IT infrastucture Cloud technology Service through chat apps Video assistance Retail FY18 Impact of investment in technology 10% 11% 14% 20% 16% 20% 22% 25% 32% 33% 40% 41%Staff will be able to focus on delivering better customer care Staff will be able to focus on generating revenue Staff will be able to take on more management