Letz Products has two decisions to make, with the second decision dependent on the outcome of the first. The company intends to build a new plant. Letz has the option of conducting its own marketing research survey for which the results will either be positive or negative. The information from this survey could help it decide whether to build a large plant, to build a small plant, or not to build at all. Letz recognizes that although such a survey will not provide it with perfect information, it may be extremely helpful. 1st decision point $49,200 Survey 2nd decision point Sur. Res. Pos. (45) Sur. Res. Neg. (.55) No survey $106,400 $2,400 $40,000 Large plant Small $63,600 3 plant No plant $106,000 No plant Large plant Small $2,400 plant 5 Large plant Small plant No plant -$87,400 (4) $10,000 6 $40,000 Fav. Mkt (0.78) Unfav. Mkt (0.22) Fav. Mkt (0.78) Unfav. Mkt (0.22) Fav. Mkt (0.27) Unfav. Mkt (0.73) Fav. Mkt (0.27) Unfav. Mkt (0.73) Fav. Mkt (0.5) Unfav. Mkt (0.5) Fav. Mkt (0.5) Unfav. Mkt (0.5) $190,000 -$190,000 $90,000 $30,000 $10.000 $190,000 -$190,000 $90,000 $30,000 $10,000 $200,000 -$180,000 $100,000 $20,000 $0
Letz Products has two decisions to make, with the second decision dependent on the outcome of the first. The company intends to build a new plant. Letz has the option of conducting its own marketing research survey for which the results will either be positive or negative. The information from this survey could help it decide whether to build a large plant, to build a small plant, or not to build at all. Letz recognizes that although such a survey will not provide it with perfect information, it may be extremely helpful. 1st decision point $49,200 Survey 2nd decision point Sur. Res. Pos. (45) Sur. Res. Neg. (.55) No survey $106,400 $2,400 $40,000 Large plant Small $63,600 3 plant No plant $106,000 No plant Large plant Small $2,400 plant 5 Large plant Small plant No plant -$87,400 (4) $10,000 6 $40,000 Fav. Mkt (0.78) Unfav. Mkt (0.22) Fav. Mkt (0.78) Unfav. Mkt (0.22) Fav. Mkt (0.27) Unfav. Mkt (0.73) Fav. Mkt (0.27) Unfav. Mkt (0.73) Fav. Mkt (0.5) Unfav. Mkt (0.5) Fav. Mkt (0.5) Unfav. Mkt (0.5) $190,000 -$190,000 $90,000 $30,000 $10.000 $190,000 -$190,000 $90,000 $30,000 $10,000 $200,000 -$180,000 $100,000 $20,000 $0
Chapter6: Target Markets: Segmentation And Evaluation
Section: Chapter Questions
Problem 17DRQ: Under what conditions might a firm use multiple forecasting methods?
Related questions
Question
Using figure 1 – explain to your client (Letz) what the above decision tree shows. Show all working.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 2 images