Consumer+, a Canadian company, is thinking about expanding their operations into either Brazil or the United States.
Question:
Consumer+, a Canadian company, is thinking about expanding their operations into either Brazil or the United States. Demand for the product in each of the countries could be High (H) or Low (L). The leadership team at Consumer+ believes that if they enter Brazil and the demand is High or Low, the resulting profits would be 5 million and 1 million, respectively. If Consumer+ enters the United States, they believe that under Low and High demand they will have resulting profits of 0.8 million and 5.5 million.
a) If Consumer+ knows nothing about the probability of High and Low demand, what is their decision under:
b)
i) Optimistic Approach
ii) Conservative Approach
iii) Minimax Regret Approach
If Consumer+ wants to maximize profit and believes that there is a 69% change that demand will be High, what is the recommended decision using the Expected Value Approach? Draw the tree and show your complete work. How much would Consumer+ be willing to pay for additional information?
A common piece of research that many companies entertain when entering a new market is consumer research.
Consumer+ is exploring whether they want to conduct a series of focus groups to see how consumers in Brazil and the United States feel about their product.
The results of the res could be Pd (P) or Negative (N). The following probabilities are available: c) d) •
When the consumer research report is positive there's a 79% chance that demand will be high. •
When demand is low there's a 65% chances that the consumer research report will be negative.
When demand is high there's a 42% chances that the consumer research report will be negative.
1) When the consumer research report is negative what is the probability that the demand is low?
2) When the consumer research report is negative what is the probability that the demand is high?
3) What is the probability that consumer research report will be positive?
4) What is the probability that consumer research report will be negative?
5) What is the expected value of Sample Information (EVSI)? -6) What is the decision strategy for Consumer+?
Expert Answer:
1 When launching a business avoid these typical blunders Poor or insufficient market research is a common blunder in business Guide A company that knows its clients and their purchasing habits can mor... View the full answer
