I currently own and operate a Gym in Broadalbin, New York called "Locked In Fitness" I have to make a crucial choice as the business's owner that could have a big impact on how my company develops. The choice here is between opening a new branch in the nearby town of Amsterdam or expanding our current facilities to meet the increasing demand in the area. This decision affects not only how we physically expand but also how we strategically place our company in the competitive fitness industry. Opening a new gym comes with a lot of investment, So I need to use an accurate decision analysis to see whats best for my business.

The first alternative involves opening a new gym in Amsterdam, a town fifteen minutes away. This growth offers a stimulating chance to seize a new market and possibly draw in a varied customer base. It also presents some difficulties, such figuring out real estate decisions, comprehending the fitness preferences of a distinct community, and managing the logistics of building a new facility from the ground up$.$ This move requires a large staffing and advertising investment in addition to a calculated approach to set our services apart from those of Amsterdam's other fitness centers. The next alternative is expanding on my current gym. At the moment there is space available in the building connected to mine, so I would only need to purchase the space and the new equipment for it$.$ The final alternative is not doing anything.

The states of nature would be:

High Community Engagement: This condition assumes a strong, supportive community reaction to either a new gym or gym expansion, which will result in a high membership rate and high service consumption.

Moderate Interest: The community is somewhat interested in this scenario, but not overly so$.$ This results in a gradual but noticeable rise in usage and memberships.

Competitive Pressure or Low Demand: In this case, the expansion's chances of success are diminished by either new competition emerging or by the expansion not drawing the expected level of interest.

High Community Engagement:

New Gym in Amsterdam: Monthly profit of $$12,500.$

Expand Current Gym: Monthly profit of $$8,333.$

Moderate Interest:

New Gym in Amsterdam: Monthly profit of $$6,250.$

Expand Current Gym: Monthly profit of $$4,167.$

Competitive Pressure or Low Demand:

New Gym in Amsterdam: Potential monthly loss of $$1,667.$

Expand Current Gym: Break even or minimal monthly profit.

High Demand Moderate Demand Low Demand

New Gym in Amsterdam $$12,500$ $$6,250-$$$1,667$

Expand Current Gym $$8,333$ $$4,167$ $$0$

No Expansion $$0$ $$0$ $$0$

Based on the Criterion of Realism $($Hurwicz Criterion$)$ with an alpha $(\backslash$alpha $)$ value of $0\mathrm{.}4,$ here's the updated decision table:

High Demand Moderate Demand Low Demand Criterion of Realism

New Gym in Amsterdam $$12,500$ $$6,250-$$$1,667$ $$3,999\mathrm{.}8$

Expand Current Gym $$8,333$ $$4,167$ $$0$ $$3,333\mathrm{.}2$

No Expansion $$0$ $$0$ $$0$ $$0$

The 'Criterion of Realism' column reflects a weighted average of the best and worst outcomes, with more weight given to the best outcome $(40\%$ weight to High Demand, $60\%$ weight to Low Demand$).$ According to this criterion, the best option would be to open a new gym in Amsterdam, as it has the highest value $($$$3,999\mathrm{.}8)$ under the Criterion of Realism. $$

Based on the selected Realism Criterion, I chose a $0\mathrm{.}4$ weighting factor, the research shows that the best payout, $$3,999\mathrm{.}8,$ is associated with opening a new gym in Amsterdam. I chose this decision$-$making approach because it provides a cautious and optimistic viewpoint that is in balance. This approach enables a realistic yet optimistic appraisal of the business expansion by taking into account the maximum potential profit in a high demand scenario and accounting for the risks associated with low demand. In a situation like this, when market circumstances are uncertain but there is room for substantial expansion, this approach seems like the way to go$.$

In conclusion, the choice to launch a new gym in Amsterdam is the most beneficial one after an in$-$depth analysis using the Criterion of Realism. This approach not only takes into account the possibility of strong market demand, but it also carefully weighs the associated dangers. It is an example of a cautiously optimistic approach to corporate expansion, weighing the likelihood of significant growth against an accurate evaluation of market uncertainty. Respond to the following: Add to the table by choosing a risk level for each state of nature $($assign a probability value to each$).$

Calculate and state the expected monetary value $($EMV$)$ for each alternative.

Discuss which alternative is best based on the maximum EMV.

Calculate and state the expected value with perfect information $($EVwPI$).$

Calculate and state the expected value of perfect information $($EVPI$).$

Discuss the most money they should pay for perfect information.