The Happy Jack restaurant chain is considering the launch of a new food product at its hamburger fast-food stores to compete with the Big M (another corporation in the fast-food business, known for particularly greasy food). Happy Jack wants to capitalize on the health craze that is gaining momentum in the United States and introduce a new line of nutritious salads. The probability of a successful product launch is 0.70 when Happy Jack’s consumer acceptance test results indicate that consumers like the product, and 0.20 when they have little to no interest in the product. When Happy Jack goes to market without a consumer acceptance test, the likelihood of a successful product launch is 0.25. Usually, about 30 percent of products put through a consumer acceptance test are successful, according to historical data. Conducting a preliminary analysis, Harry concludes that the value to the Happy Jack, should the new salad line be successful, is approximately $25 Million over the life of the product. If the line is not successful, the company will likely lose $5 Million. This $5 Million would be in addition to the $2 Million for any consumer acceptance test. All product development costs are considered “sunk costs” and are not included in these calculations of product success or loss.

Directions:

1. Conduct a proper decision and risk analysis for this scenario. Do the following:

•List the decisions and the uncertainties and number the nodes in chronological order.

•Draw a schematic tree on the Schematic Tree tab that illustrates the order of decisions and uncertainties. Make sure to use the nomenclature found in the Bollywood Movies Case Study PowerPoint for all diagrams.

•Draw the decision tree on the Decision Tree Tab and add probabilities, outcomes, and values to complete it.

•Verify chronological order. Use Bayesian Revision on the tab below to reverse the order of the probabilities to ensure that the decisions and uncertainties are chronological in the tree.

•Rollback. Use the rollback procedure to compute the expected monetary values of the tree. Do this on the Rollback tab.

2. Justify the two most important actions that you would recommend Happy Jack take based on your decision tree calculations in 1.

3. Calculate the maximum amount of money that Happy Jack should pay for perfect control. Show the calculation and explain your calculation process.

Answer rating: 100% (QA)

1 Decisions and uncertainties 1 Whether or not to conduct a consumer acceptance test 2 Wh... View the full answer