Strategic Decision Making with Data Analytics

Question : Multiple Decisions

You have a company that sells cookies in Thailand and you are considering moving into a new market: Cambodia.It is not feasible to ship cookies from your current factory to the new market so you must establish a production facility in Cambodia.You have already done the analysis and found that building a new cookie factory in Cambodia is not possible.

Someone in your company suggests an alternative approach.You could form a partnership with an existing Cambodian bakery to make your cookies.You would not have to pay for the building and factory setup but you would have to guarantee revenue to your new partners.In this case it would take $5 Billion Baht for the configuration, setup, advertising and placement in stores.Your potential partner demands that they received $30 Billion Baht regardless of the market response to the cookies. Not only that but they demand that there be some co-branding on the packages.

You new partner also has a new product coming out and it will reach the market just before your cookies.They are producing a new type of Ciabatta bread, and your market analysts tell you that its success or failure will affect the market response of your cookies.

The market response to your cookies will determine how many cookies are sold and the total revenues that you receive.The following are the amounts you stand to make based on strong, medium and low market responses, in the case that the ciabatta bread is a failure.

There is a 20% chance of a strong market response which will yield $60 Billion Baht in revenue

There is a 30% chance of a medium market response which will yield $40 Billion Baht in revenue

There is a 50% chance of a weak market response which will yield $10 Billion Baht in revenue

The following market responses to your cookies are in the case that the ciabatta bread is a success:

There is a 50% chance of a strong market response which will yield $60 Billion Baht in revenue

There is a 35% chance of a medium market response which will yield $40 Billion Baht in revenue

There is a 15% chance of a weak market response which will yield $10 Billion Baht in revenue

Since you are potential partners, you demand to see the market research on the upcoming rollout of the ciabatta bread.The result?There is 60% chance that the new ciabatta bread will fail.

So, whichdecisionshould you make (move into the new market or not) if you want to have greater profits in the long run (expected monetary value)?