You are given the following data by Ecosneak:

Their annual promotional budget (of €300,000)
• The cost of each Billboard advert (€2,000) and the cost of each Magazine advert (€5,000);
• The estimated ‘reach’ of each Billboard advert (20% of the men’s and women’s total market in 2022) and each Magazine advert (45% of the men’s and women’s market in 2022);
• There is a signed contract with World of Sports that Ecosneak will place at least 30 adverts per year in the Magazine;
• There is a limit of 100 on the number of dedicated Billboard spaces available in
Edinburgh for Ecosneak to use:
• Q.1 Use this information to formulate Ecosneak’s promotional campaign as a linear programming problem but do not solve it.
• Q.2 Use the information given in the case study to undertake a scenario analysis of first-year profits in the kid’s market. Set up the profit ‘model’ and use this to calculate ‘base-case’, ‘worst-case’, and ‘best-case’ scenarios for first-year profit.

Scenario Analysis: The management team of Ecosneak would like to separately model the first-year (2024) profit from entering the kid’s market segment (Option 2, above), using scenario analysis. Assume a notional fixed cost for the first year of €20,000 (€120,000/6) and a selling price of €60 per pair. Assume the variable costs for the bicycle (Purchase and Distribution) can vary between €20 and €40, with a most likely value of €32 per pair. First- year demand for the bicycle is expected to range from 8,000 to 18,000 pairs, with 13,000 units the most likely level of demand for the sneakers
• Q.3 Explain to Ecosneak management the value and limitations of using scenario analysis as a decision-making technique

Answer rating: 100% (QA)

1 Ecosneaks promotional campaign can be formulated as a linear programming problem as follows ... View the full answer