Week 8 : All TCOs - Final Exam Time Remaining: Page 1 1. (TCOs A, B, C, D, E, F, G, and H) Hoosier Services recently celebrated its 10th anniversary as a professional services firm that handles investigations for law firms offering amenities, such as background checks, surveillance, interviewing of witnesses, crash scene investigation, and other related services. The company was founded by Lee Herbert who had extensive experience working for companies that handle investigative work. Herbert is more of a people person and is always looking for the next new client to take on. Admittedly, Herbert had no experience in running a business when he decided to go out on his own and enlisted the help of his long time friend, Bradley Simmons. Simmons has spent his career working for larger corporations in finance and had no experience in investigative services, but was looking for a change. Over the 10 years since the company's founding, Hoosier Services struggled at first but slowly grew over the last five years. The more law firms the company works with, the more cases they receive. The more cases they receive, the more hours they can bill. Hoosier currently has six investigators and two clerks in addition to Herbert and Simmons. Over the years, they have expanded and contracted based on the volume of business and the local economy. Based in Indianapolis, Indiana, Herbert is really interested in expanding the business to other major cities in the region, believing that "there are only so many law firms here in Indianapolis." He feels that if they've survived 10 years, then they should continue to focus on growing the business. Simmons, on the other hand, feels that expansion will put the company at risk as it takes time to develop a decent client base. They opened a second office several years back across town but eventually closed it when it didn't generate enough revenue to cover expenses. He's worried the expansion may bankrupt the company. Even though the two are business partners, Herbert is the president and Simmons the vice president. Herbert asked Simmons to evaluate several options to further expand the business. From Herbert's perspective, he has concluded that three objectives are important in this decision. First, is to find a city with a large number of Fortune 500 companies, a cost of living comparable to Indianapolis, and a city that is in a reasonable distance from Indianapolis as he and Simmons would be spending a lot of time in the new office at first. Because both have families with young children, Herbert feels that the distance is twice as important as the other criteria. Here is the summary of Simmons' research. I. Chicago, Illinois: Number of Fortune 500 Companies: 8; Cost of Living Comparison: 1.045 (more than Indianapolis); Driving Distance: 159 miles II. St. Louis, Missouri: Number of Fortune 500 Companies: 8; Cost of Living Comparison: 0.809 (less than Indianapolis); Driving Distance: 461 miles III. Milwaukee, Wisconsin: Number of Fortune 500 Companies: 5; Cost of Living Comparison: 0.910 (less than Indianapolis); Driving Distance: 239 miles 1. Define the decision problem and the general nature of the problem. (20 Points) (Points : 20) In this case the decision problem is w hether to expand the company to major cities in the region or not. The nature of the problem is the expansion could possibly put the company at risk of bankruptcy. 2. What event triggered the situation? (20 Points) (Points : 20) The event that triggered this situation w as Herbert felt that there w ere few law firms in Indianapolis. Herbert feels that since the company has survived for 10 years and the company should focus on grow ing the business. 3. Are we imposing any implied constraints on the situation? (20 Points) (Points : 20) An implied constraint in this situation is that Herbert does not have any experience in running a business and Simmons does not have any experience in running an investigative service. 4. Define the objectives. (20 Points) (Points : 20) *Find a city w ith a large number of Fortune 500 companies *Find cities w ith comparable cost of living to Indianapolis *Find cities in a reasonable distance from Indianapolis 5. Identify the alternatives. (20 Points) (Points : 20) *Expand the company to Chicago, Il w here there are 8 Fortune 500 Companies w ith a driving distance of 159 miles and the cost of living is more than Indianapolis. *Expand the company to St. Louis, Mo w here there are 8 Fortune 500 Companies w ith a driving distance of 461 miles and the cost of living is less than Indianapolis. *Expand the company to Milw aukee, WI w here there are 5 Fortune 500 Companies w ith a driving distance of 239 miles and the cost of living is less than Indianapolis. 6. Compare and contrast the consequences for all three alternatives by the fundamental objectives. Rank each alternative using proportional scoring, include weights on the objectives. Are there any dominated alternatives that can be eliminated? Are there any even swaps? (70 Points) (Points : 70) less companies than Chicago and St. Louis. Their cost of living is less than Chicago. Scoring Model(3-best, 2-second best, 1-w orst) Chicago Number of companies - 3 Cost of living - 1 Distance - 3 St. Louis Number of companies - 3 Cost of living - 2 Distance - 1 Milw aukee Number of companies - 1 Cost of living - 2 Distance - 2 Rank 7. What decision-making styles are at work here? What is their attitude towards risk? (20 Points) (Points : 20) The decision making styles include Herbert's intuition and thinking the company w ill do better in another city and Simmons' sensing of the possibility of bankruptcy because of his know ledge of financial standings. Herbert feels their risk are minimal since the company has been doing good for the past 10 years and Simmons feels that this is a huge risk since this attempt has previously been done in the same city and it failed. 8. Are there any biases in play here that may impact the effectiveness of the decision? (20 Points) (Points : 20) There is bias on Herbert's behalf because he feels that his company can strive w herever there are Fortune 500 companies since it has survived in Indianapolis for the past 10 years. This bias could possibly put the company at risk since he is not familiar w ith the financial aspect of the company. 9. What are the uncertainties for this decision situation? What are their consequences? (20 Points) (Points : 20) If the decision is made to move to another city there is a possibility the cost of living could increase more than w hat w as already established. This could lead to a decrease in revenue for Hoosier Services. Another uncertainty are the Fortune 500 companies that w ere established could leave the city and this could lead to a decrease in revenue. Saving gas on the distance betw een Chicago and Indianapolis w ill even out the cost of living. 10. Evaluate this decision situation using tradeoffs. What location should they select? Are there any linked decisions? Discuss any assumptions as needed. (20 Points) (Points : 20) A tradeoff for this situation could be to relocate the company to a city w ith a large number of Fortune 500 companies instead of adding on to the company. Hoosier Services should select Chicago to do business since they have the most Fortune 500 companies at the shortest distance. The gas saved due to the short distance w ill make up for the cost of living in Chicago. The linked decisions are picking a location for the company and hiring employees for the company. Time Remaining