Economics Essay

This year’s Economic essay assignment is split in four sections. Your task is to solve TWO OUT OF THE FOUR of the following projects using the knowledge acquired in class in combination with your own research. Each of the

 two sections you choose carries equal weight in the determination of the final mark for the essay:                             

 

 

Welcome to the University of Edinburgh Consulting Division (UECD). As an intern, you will be reporting to Lukas, the Director of Economics and Business Analytics and assist him in carrying out consultancy projects for clients all over the world. This summer, however, Lukas had a minor accident while holidaying in Spain and his leg is in a cast. He cannot travel so you now must take the lead in the following projects:

 

 

PROJECT ONE: BARCELONA. (Bonus 10 marks for best answer) 

Your first client is Barcelona Turisme, the official entity for promoting tourism in Barcelona, created by the

City Council and the Chamber of Commerce. Once you arrive to their offices, you meet Neus, the Tourism Commissioner, and she explains the project: “One of the major economic activities in Barcelona is tourism, at least it was before the covid crisis, and we expect it to continue after we return to normal, hopefully in 2021. Leaving that aside, in recent years there has been a political drive to control tourism growth due to the impact it has on the city. One way to achieve this goal is with the introduction of tourism taxes, like they do in Venice. At the moment, everyone that stays in tourism accommodation in Barcelona (or the rest of Catalonia) must pay a tourism tax. In 4-star hotels, for example, the tax is €1.1 per person per night but there are different amounts depending on the category of the establishment or its location. We are considering doubling the tax amounts after the covid crisis but, before approving this change, the Major’s office wants to look at evidence of the impact these taxes could have on the number of visitors to the city. This is where you come in. The last time I met with your manager he talked about carrying out an econometric study to check the elasticity of visitor demand to tourism taxes in Spanish cities. The only requirement he had is that Barcelona Turisme should provide some critical data needed to do the regression. I have been looking into our files and the best that I can provide is a dataset with the monthly number of airline arrivals from the United Kingdom to all airports in Spain between 2012 and 2019 (available in LEARN). Since the UK is one of our key markets, you can carry out the study for this origin country only. However, you will need to complete the dataset with other variables, starting with the actual data on tourism taxes in Spain.”  

 

You write to Lukas back in Edinburgh to update him on your client meeting but the only thing you get is a response from his secretary with a reading he left for you (see below). Perhaps this paper will give you some clues on how to continue this project. Neus wants a short report (approx. 1,000 words) with three sections: 

  1. selection of explanatory variables and data sources (with justification and references to other publications and/or relevant theoretical concepts),
  2. model specification and discussion of your econometric results (with focus on the tax elasticities),
  3. brief mention of the limitations of your approach and possible ways to improve your model.

Remember to append your econometric estimation as well as the datasets as tables within the document.

 

Essential Reading:  

Peng, B., Song, H., Crouch, G., and Witt, S.F., 2015. A Metaanalysis of International Tourism Demand Elasticities. Journal of Travel Research 54 (5), pp. 611–633. Available at https://journals.sagepub.com/doi/full/10.1177/0047287514528283

 

Hints: Refer to the guidance provided in the first Tutorial and do not start this question at the last minute, data collection takes time. The Spanish National Statistics Institute is called INE and it has an English page (http://ine.es/en/welcome.shtml). Eurostat can also be a helpful source of information. You will not be marked on the statistical significance of the econometric results.

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PROJECT TWO: PORT ELIZABETH (Bonus 10 marks for best answer)

The next month, you and another senior consultant must accompany a client to South Africa in a “due diligence” project. The client is the VP International of a major British manufacturer of car parts with production plants in many countries. The company is contemplating increasing its presence in South Africa after the Chinese car manufacturer BAIC decided to open a new multi-million car assembly plant in Port Elizabeth (https://www.youtube.com/watch?v=XJ6hYCOEbg). However, there were long delays in the completion of the BAIC project and now your client is having doubts about investing more in this country.

Therefore, they have commissioned a report about the long-term prospects of the South African car industry

 

The visit to the Coega Special Economic Zone was interesting but, as expected, everyone you encountered seems highly optimistic about the future. You call Lukas back in Edinburgh and he suggests that you write a 1,000-word report that establishes any similarities and differences between the South African and the Australian car industries, with a focus on the challenges to achieve economies of scale in such a competitive sector. Employ as much data as you can find to prove your points. For the sake of the client, remember to define all relevant theoretical concepts and explain how they apply to the companies you refer to.

 

Conclude your report by briefly describing a method to determine the efficiency of the South African car industry in order to entice the client to commission another project.

 

 

Essential Reading:

 

“Start of production at BAIC plant delayed until later this year”

https://www.engineeringnews.co.za/article/startofproductionatbaicplantdelayeduntillaterthisyear20190226/rep_id:4136

 

“BAIC opens compact SUV plant in South Africa”

https://africaautomotivenews.com/2019/05/23/baicopenscompactsuvplantinsouthafrica/

 

“Toyota to cease manufacturing cars in Australia” 

http://www.theguardian.com/world/2014/feb/10/toyotaceasemanufacturingcarsaustralia  

 

— —  PROJECT THREE: ATLANTA

Lukas is a personal friend of Kate, the Head of Sales of Delta Airlines (they coincided in their Masters year in Edinburgh) and thanks to that contact, another project opportunity has come up. Lukas forwards you Kate´s email alongside a return business-class ticket to Atlanta International Airport (ATL). You read the email on the plane down to Heathrow:

 

Lukas,

 

Hope you are well, remember the HR mess that I mentioned last time? Well, it has escalated a little bit and now we have a really bad climate in the office. It appears that some people in my sales team have not been warning customers about the consequences of using “hidden-city tickets”, and a group of consumers have sued Delta Airlines (DL) about losing their travel miles. The company is looking to fire the employees responsible for this mess. I need to commission a short report (approx. 1,000 words) on the existence of “hidden-city tickets” in routes between our main hubs to send our legal department. I would normally use our internal economics division for this job but, given the close relationship they have with my sales team, I prefer to use an external consultant. I wonder if you have someone that can draft the report and come to our office in downtown Atlanta to deliver a presentation with its main findings.

 

Looking forward to your reply,

Kate

 

While waiting for your flight connection in London, Lukas gives you a call and says that this is an easy one. Since you will have internet access in the plane, you can do this during the transatlantic flight. He recommends that you use the website www.skiplagged.com to do your research, and that you focus only on DL flights to be flown in any week of November 2020. Lukas wants to revise your work after you land before sending it to Kate, so you must email him a 1,000-word report with, at least, the following contents:

 

  1. a) Introduction to the concept of hidden-city ticketing (illustrated with a screenshot of the largest hidden-city fare difference you found)

b)Describe your research on DL fares and present the main findings (supported by a summary table)

  1. Explain the economic reasons for the existence of this type of tickets.
  2. Explain why they are damaging for DL and its customers.

 

 

Essential Reading:

 

CTV (2017) Hidden city ticketing: How air travellers are taking chances to save big http://www.ctvnews.ca/business/hiddencityticketinghowairtravellersaretakingchancestosavebig1.3511629

 

GAO (2001) Restricting airline ticketing rules unlikely to help consumers

http://www.gao.gov/new.items/d01831.pdf

 

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PROJECT FOUR: LONDON 

 

Lukas has now sent you to London, in order to participate in the Startup Grind Europe event. You are behind a stand that the event organizers provide for consultants to offer their services pro bono to entrepreneurs, who may come to request different types of business advice. The second day of the conference, you bump into some former colleagues from “The Entrepreneurial Challenge: Creating a New Venture” course. They stayed in touch with one another after graduation and are now thinking of bringing their business idea to market: an app-based platform to connect buyers and sellers. They need advice on network effects in order to prepare for an upcoming business pitch. You agree to prepare a 1,000-word written report for them.

 

After providing a short introduction to the platform (which you can move to the appendix), please cover the following in your report:

 

  1. Explain the different sides of the platform and provide recommendations for pricing.
  2. Indicate what type of network effects it experiences and provide recommendations to achieve a critical mass of users.
  3. Discuss the main threats to your client´s market power and how they can protect against them.

 

[If you cannot find suitable TEC examples, then select any web-based or app-based platform launched in 2019]

 

Note: The best answer among those using a TEC proposal will get a bonus of 10 marks.

 

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You can provide tables, figures, pictures, screenshots, and appendices (if necessary) to support your arguments. These contents will not be part of the essay’s word count. You are also expected to look for your own additional references, which can include academic papers, industry reports, press releases, online videos, and other sources. Separate lists of references must be provided at the end of each section. Formatting and presentation will also be taken into account for the final mark.  

 

Maximum essay length: 2,000 words (+/- 10% according to the University regulations)  

Deadline: Thursday, November 5th 2020  

 

Any questions please contact: Dr. Augusto Voltes-Dorta

augusto.voltes-dorta@ed.ac.uk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Disclaimer: Even if the companies mentioned are real, all case studies are fictional. These projects are designed for teaching purposes only.

University of Edinburgh Business School 

Economics and Business Analytics – MSc Management  Business Analytics Report 2020 (weight 50%)  

 

This year’s Analytics assignment is split in four sections. Your task is to solve TWO OUT OF THE FOUR of the following projects using the knowledge acquired in class in combination with your own research. Each of the two sections you choose carries equal weight in the determination of the final mark for the report:

 

 

 

In the second part of your internship, we will focus more on quantitative techniques so you can develop your analytic skills. Make the most of this period by getting acquainted with as many different data analysis tools as possible, you are likely to benefit from that experience in the future. Your line manager Lukas is already recovered so there is no more travelling around. You will spend this time working with different clients based in Edinburgh.

 

 

 

 

PROJECT ONE: AIRPORT STAFFING

 

Edinburgh Airport is one of UECD’s best clients. Today you are meeting with Phil, the Operations Manager. Despite the protracted shutdown in 2020 due to covid-related travel restrictions, he still needs to plan the staff budget for 2021 under “business-as-usual” conditions. He brings you up to speed: “Edinburgh Airport employs its own staff for baggage handling, but this is easier said than done because traffic is so seasonal that, at any one point during the year, the staff requirements can vary between approx. 110 and 250 people. Thus, it would be inefficient to hire a permanent roster all year round, and the number of people must be adjusted every month. There are three types of employees: Permanent, Seasonal and Summer. Permanent staff cost £2,500 per month and are hired for the full year. Seasonal staff costs vary depending on the month for which they are employed (see Excel on LEARN). Summer staff can only be employed on a 4-month contract between May and August. They cost £2,000 per month and cannot consist of more than 40% of the month’s workforce. The conditions for employing summer staff will be renegotiated with the union next year but, for 2021, we will be bound by these restrictions. Each member of staff (regardless of type) is expected to process an average of 336 bags per day for the duration of the contract, once breaks and rest days are factored in.”

 

He hands you a memory stick with some data and continues:

 

We do not even know how many bags we need to handle so a forecast will be necessary. Have a look in the memory stick, you will find an Excel spreadsheet with historical passenger numbers for Edinburgh airport broken down into three categories: domestic, EU and Worldwide passengers. On average, I can tell you that a domestic passenger will carry 1.03 bags; an EU passenger will carry 1.51 bags; and a Worldwide passenger will carry 2.68 bags. In the end, what I need is a staff budget that indicates the number and types of staff required on each month and the cost of employing them.

 

In summary, your task it to a) forecast the monthly bag numbers for 2021 (using one of the time-series methods covered in Lesson 6), b) formulate the workforce problem as a Linear Program that minimises annual staff cost and solve it using Excel Solver. Summarize your method and recommendations for the Operations Manager in a short report (approx. 1,000 words). It is expected that you justify your choice of forecasting method, describe the LP model, and provide a brief sensitivity analysis for the LP solution.

 

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PROJECT TWO: FORMULA ONE (Bonus 10 marks for best answer)

One day Lukas forwards you an email from Liberty Media, the company that owns the Formula One Championship. Since acquiring it in 2017, they have placed strong focus on improving social media engagement by the participating Teams and Racers in order to reach a broader audience. In early 2018, F1 was claiming to be the fastest growing sport brand on social media but it is still far away from other global sports like football. Furthermore, it is unclear whether the severely reduced championship calendar in 2020 due to the global covid pandemic has led to a reduction in the participants’ social media activity and/or the fans’ engagement. Liberty media is looking to ger further insights on this issue. 

 

Lukas is very keen to develop UECD’s sport analytics division, but he does not have time to take on the project himself. He asks you to deliver a one-page infographic that illustrates any aspect of the use that F1 teams have made of the social network instagram at any time during the 2020 season and present it in contrast with the equivalent 2019 data. The infographic should be accompanied by a short report (approx. 1,000 words) that summarizes the key points from the data presented as well as a short description of your data visualization approaches. In order to satisfy the client, your design should combine good storytelling with different types of visualizations. The use of Tableau is mandatory in this task. 

 

Essential Reading:

F1 claims to be fastest growing sport brand on social media. ESPN 29.01.2018.

http://www.espn.co.uk/f1/story/_/id/21966301/f1claimsfastestgrowingsportbrandsocialmedia http://www.f1.socialmediaindex.co.uk/ http://www.redtorch.co/formula1socialmedia/

 

Hint: Refer to the guidance provided in class about how to scrape data from instagram. Besides Tableau, you will also need to employ excel to clean the data after scraping.

 

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PROJECT THREE: RESTAURANT LOCATION (Bonus 10 marks for best answer)

 

The next client is Ciro, the owner of “The Peruvian” food stand, which was a great success during the 2019

Edinburgh  festival due to its unique menu and prime location within the food court next to Waverley Station (https://www.facebook.com/pages/category/FoodStand/ThePeruvian2007493212828457/). Ciro actually remembers you visiting the stand a couple of times and he gives you some good news: “As you know the festival was cancelled in 2020, but I am actually in the process to open a permanent restaurant in the city by Summer 2021. I have not started to look for a place yet. I wonder if I could hire a consultant to do some location analysis to help me in the process”. You are obviously interested in anything that brings more Peruvian food to Edinburgh and accept the project. The rest of the meeting, however, was not particularly helpful. He is clear that both economic and accessibility considerations need to be taken into account in choosing the right place, but he did not give you any precise guidelines on where to start. After a phone call with Lukas, he emails you a reading that could be helpful.

 

Your task is to provide rankings of suitable real-world locations around Edinburgh to open the restaurant (e.g. not exact addresses but approximate areas). You are expected to use a multi-criteria decision model with different factor weights to create different rankings. Summarize your recommendations for the restaurant owner in a short report (approx. 1,000 words). Your deliverable must explain your decision criteria and include information about your data collection. The use of ArcGIS is mandatory in this task.

 

Essential Reading:

Tzeng et al. (2002) Multicriteria selection for a restaurant location in Taipei. International Journal of Hospitality Management 21 (2), pp. 171-187. https://www.sciencedirect.com/science/article/pii/S0278431902000051

 

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PROJECT FOUR: CUSTOMER SEGMENTATION

 

You meet Sarah, the Head of Sales of Temptation Gifts (https://www.temptationgifts.com/), a medium-size online retailer. The company sells unique all-occasion gifts to individual customers and wholesalers all around the UK. After experiencing strong growth in the last year due to the covid restrictions on physical stores, the managers are now considering more sophisticated marketing and pricing strategies. As a starting point, the Sarah has tasked you to carry out a customer segmentation using the available sales data from 2019 (see Excel attached on LEARN). Summarize your method and conclusions in a short report (approx. 1,000 words). It is expected that you explain the chosen clustering variables (at least three), the clustering approach, describe the identified segments and perhaps provide some marketing recommendations based on your results.

 

Hint: Agglomerative Hierarchical Clustering is the recommended method.

 

Essential Reading:

 

Chen et al., (2012). Data mining for the online retail industry: A case study of RFM model-based customer segmentation using data mining. Journal of Database Marketing & Customer Strategy Management 19 (3), 197–208. https://link.springer.com/article/10.1057/dbm.2012.17

 

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You can provide tables, figures, pictures, screenshots, and appendices (if necessary). These contents will not be part of the report’s word count. You may also want to look for your own additional references or data sources if needed. Separate lists of references must be provided at the end of each section. Data visualization, formatting and presentation will also be taken into account for the final mark.  

 

Maximum report length: 2,000 words (+/- 10% according to the University regulations)  

Deadline: Thursday, December 10th 2020  

 

Any questions please contact: Dr. Augusto Voltes-Dorta

augusto.voltes-dorta@ed.ac.uk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Disclaimer: Even if the companies mentioned are real, all case studies are fictional. These projects are designed for teaching purposes only.