1.

0 INTRODUCTION

Engineering economic is a subset of economics concerned with the utilization and

application of monetary standards in the investigation of building decisions. Engineering
Economic is additionally about the investigation of how people or social orders utilize rare
assets that nature and past eras have given. Engineering is the profession in which knowledge
of the mathematical and natural sciences gained by study experience and practice is applied
with judgment to create approaches to utilize economically the material and power of nature
for the benefit of humankind. Engineering economics is a subject of fundamental significance
to Engineers. It is pragmatic by nature, integrating economic theory with engineering practice.

In this project, engineering economy can be utilized to perform a study about business
and marketing activity. We were select LBH NORTHERN ENTERPRISE as our grocery store
of research. We were choosing this because it is the kind of business that contain a lots of detail
that we will be needed. It is also because we were staying at hostel that nearest with this stall.
The owner of this grocery store was really friendly and give us permission to interview and
collect the data from there. He also give a lots of help and advises about the business.

Through this method, we able to see clearly and understand about how was the business
operated. Based on collected information, we had known the actual profit, losses and the capital
budget. From that we can construct the cash flow to represent all the information. Cash flow is
important to be done because from that we were able to understand what is happen in our
business and overcome the problem that we will faced.

2.0 IDENTIFYING THE PROBLEM OF THE BUSINESS

We have done an interview with the owner of the grocery store on how they started the
business, problems that they are facing and so on regarding to the task given. From the research
that we had done, there is some problems that the owner has faced.

The first problem that have been told by the owner of the grocery store is the increasing
price of the product due to the unstable Malaysia economy. This is the reason why most product
have higher price than before. Through this kind pattern of economy causing people to save
more and no spent much on buying things and it affects the profit for owner store.
 Besides, the next problem is the inventory loss. Grocery stores deal with fragile
inventory every day, such as fruit that quickly spoils and boxes and cans that are vulnerable to
damage. In fact, the inventory shrink rate at grocery stores is more than double that of retail
stores across the board. Grocery store inventory must survive the perilous journey from the
manufacturer to the store to the shelves to the hands of the consumer. This includes loading,
transporting, unloading, storing and stocking all of which leave goods open to expiration, theft,
loss and harm.

The last problems that the owner faced is the seasonal business. This is because the
store is located in college area and it is far from the city which mean there are only a few people
live near that region. When the university students have a semester break that means the
business profit will down for every year.

3.0 OBJECTIVES OF THE STUDY

Based on the task given for the Engineering Economics subject, our objectives are:

To analyse cost/revenue data and carry out make economic analysis in the
decision making process to justify or reject alternative/project on an economic
basis.

To solve the business problem on economic terms in doing business and not just
focusing on profit but also think about alternative in encounter problem while
started the business.

To prepare the engineering student to be function in the business and

management side of professional engineering practice.

To understand the fundamental concepts of engineering economy.

4.0 DATA COLLECTION

The information or data regarding the LBH Northern Sdn.Bhd business has been
successfully collected through the short interview session with the owner of the business. This
is possible through the agreement of the owner of the store. The data include:

1. Estimated initial cost (starting capital).

2. Estimated operation and maintenance cost per month (electrical bills, water bills, rental
fees).
3. Estimated annual income from the sale of goods available at the store.
4. Estimate of operating interest rate of return.

The gathered information are as follows:

NO. DATA COST

Estimated initial cost

1. RM 50,000
(starting capital)

NO. BILLS AND FEES COST

Store rental fees (two
1. RM 6,000
lots)
2. Estimated operation cost
2. Electrical and water bills RM 2,300
Total (per month) RM 8,300
Total (per year) RM 99,600

3. Estimated annual income RM 400000

monthly RM 1,000 - RM 2,000

4. Net profit
annually RM 12,000 - RM 24,000
5.0 REALISTIC CASH FLOW ESTIMATE

5.0.1 Cash inflow

Income: +RM 400,000 per year from the sale of the grocery stores goods.

A = RM 400,000

Years
4 8 12 16

P = RM 50,000

Figure 1: Present/Annual (P/A) cash flow diagram for annual income.

5.0.2 Cash outflow

Operation cost: -RM 99,600 per year for operation cost (store rental fees and bills).

4 8 12 16
Years

A = RM 99,600

P = RM 50,000

Figure 2: Present/Annual (P/A) Cash Flow Diagram for annual operation cost.
6.0 ALTERNATIVE SOLUTION

There a few alternative ways that can be used to upgrade or renovate the store for more
interesting and attractive looks. First of all we can use promotion. Second one, we can use
sound effect. Next, we use banner and lastly is interesting information.

7.0 EVALUATION OF EACH ALTERNATIVE

Great store does not always attracting customers but promotional efforts do. So, make
sure you are actively promoting your store. The good news is, you do not have to spend a
fortune in getting people to be aware of your store. There are some ways that does not cost
much, but bring considerable impact to your business. But, at least you need to get involved in
local communities to get the words out about your store. Participating and getting involved in
a local store charity, supporting the local store community and those things will add up to your
promotional efforts.

Second one is make some sound effect in the store. You should display any video or
audio that suits with everyone. Using the latest movie video or audio song or any funny short
films may help you to attract people to come to your store. While customers enjoy the video
and audio, there is high possibility that they will add their purchases and invite their friends to
shopping at your store together.

Next, hang an attractive banner. Every store need to have an interesting banner to ease
people to recognize their store. Everyone will have their own banner but the different is how
creative, interactive and how innovative their banner are. For this solution, the banner need to
be more highlight. It should be added more lights and led or some arts and decoration on the
banner. In result, people will be attracted to it and people can see it from far to find what was
on that banner.

Lastly, for the final solution, you can add some interesting information on the items that
you are selling. For each item, you can add such as the ingredients that have been used, how
many calories and how healthy the product you sell. You can also highlight what products are
rare that have been added in your store that is not in others store. This solution can help people
who are in a hurry to find the correct items and also help people to buy a good products in your
store.
8.0 BEST ECONOMIC ALTERNATIVE

For the best economic alternative, we have choose the promotion as the best idea. After
a few discussion and a bit of research, it can be said that promotion is the most important part
in business especially in store business. It need to be promote to let everyone knows and to
attract more customer. Promotion is also a method that used to show to the people that your
store is different from others store. It can be showed by the way you promote your store and
how creative you are in interacting with people.

9.0 CONCLUSION

As a conclusion, it has been prove that applying the method in Engineering economic
is better than usual method. It can be said that it help the owner of business to upgrade their
business and identify their lack of in business. This method had shown the right way to do a
business somehow train the business people to me more relevant in business using the easiest
way. People need to be more creative to less the work but increases the profit. Always greedy
to be better in business and make some research to gain the ideas about the business tricks and
more trending.

10.0 PROFESSIONAL ETHICAL AND COMMITMENT TO COMMUNITY

(1) Honest in business activity.

It is important for a professional to be honest in his/her business activity. This is because

a professionals honesty in his/her business activity is a fundamental aspect to develop the
community trust. The community will support the business activity that they trust hence the
business sale will have a higher value of profit over time.

(2) Fair in business activity.

A professional need to be fair in his/her business activity by treating their customer and
community equally without any discrimination. By doing so they can prevent any doubt from
the community toward their business activity. For example, they need to treat two customers
with different status in society similarly or treat by using the equity concept.
(3) Acquire and maintain professional competence.

A businessman or entrepreneur need to acquire a validation for their business activity

professionalism. This thing can be done by attending seminars or classes that is related to their
business activity. This is important so that the businessman or entrepreneur that have acquired
the professional competence can provide their customer with a service which will make
customer comfortability and service quality as a priority.