Interpretation:
Decision analysis process based on the techniques used in the supplementary chapter SCE to evaluate the choice of vendors.
Concept Introduction:
Decision-making strategies are those strategies that help the professionals to select the best alternative according to the situation.
Explanation of Solution
The aggressive strategy is also known by the name optimistic strategy. In this technique, alternate is selected based on their maximum possible payoff. The main objective of this strategy is to maximize the maximum. Conservative strategy is also known as the pessimistic strategy. The main objective of this strategy is to maximize the minimum profit. The opportunity loss strategy minimizes the maximum regret.
Given data
Decision Alternative | Short ($) | Medium ($) | Long ($) |
Delphi Inc | 4 | 5.5 | 8 |
CRM international | 6 | 4.25 | 6.5 |
Murray Analytics | 4.5 | 5 | 7.2 |
Aggressive strategy
In the aggressive strategy, maximum cost based on the time duration for each alternative is recognized i.e. $8 for Delphi Inc, $6.5 for CRM international, and 7.2 for Murray Analytics.
Thus, in this case, that alternative has been selected which has the highest payoff. Hence, the alternative which has the highest possible payoff is Delphi Inc ($8).
Conservative strategy
In the conservative strategy, minimum cost based on the time duration for each alternative is recognized i.e. $4 for Delphi Inc, $4.25 for CRM international, and 4.5 for Murray Analytics.
Thus, in this case, that alternative has been selected which has the highest cost value. Hence, the alternative which has the highest cost value is Murray analytics ($4.5).
Opportunity strategy
In the opportunity strategy, maximum cost based on the time duration for each alternative is recognized i.e. $6 for short, $5.5 for CRM international, and $8 for Murray Analytics.
Medium and long term duration is subtracted from the maximum cost identified in the previous steps to achieve the opportunity loss.
The short time duration for Delphi Inc. is as follows.
The short time duration for Delphi Inc. is as follows.
The short time duration for Murray Analytics is as follows.
Similarly, opportunity loss can be achieved for short, medium, and long time duration for each alternative. Thus, maximum loss for each alternative is recognized as $2 for Delphi Inc., $1.5 for CRM international and $1.5 for Murray Analytics. Minimize the maximum cost is achieved in previous steps is $1.5 for CRM international and $1.5 for Murray analytics.
Aggressive strategy (Maximax) | ||||
Decision Alternative | Short ($) | Medium ($) | Long ($) | Maximax |
Delphi Inc | 4 | 5.5 | 8 | 8 |
CRM international | 6 | 4.25 | 6.5 | 6.5 |
Murray Analytics | 4.5 | 5 | 7.2 | 7.2 |
Conservative strategy (Maximin) | ||||
Decision Alternative | Short ($) | Medium ($) | Long ($) | Maximin |
Delphi Inc | 4 | 5.5 | 8 | 4 |
CRM international | 6 | 4.25 | 6.5 | 4.25 |
Murray Analytics | 4.5 | 5 | 7.2 | 4.5 |
Opportunity loss strategy (Minimax) | ||||
Decision Alternative | Short ($) | Medium ($) | Long ($) | Minimax |
Delphi Inc | 4 | 5.5 | 8 | |
CRM international | 6 | 4.25 | 6.5 | |
Murray Analytics | 4.5 | 5 | 7.2 |
Opportunity loss strategy (Minimax) | ||||
Decision Alternative | Short ($) | Medium ($) | Long ($) | Minimax |
Delphi Inc | 2 | 0 | 0 | 2 |
CRM international | 0 | 1.25 | 1.5 | 1.5 |
Murray Analytics | 1.5 | 0.5 | 0.8 | 1.5 |
Thus, from the above calculation, it can be concluded that the
- Delphi Inc. is selected when an aggressive strategy is applied.
- Murray Analytics is selected when the conservative strategy is applied
- Both CRM international and Murray analytics is selected when the opportunity loss strategy is applied.
Want to see more full solutions like this?
- Scenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. Is Ben Gibson acting legally? Is he acting ethically? Why or why not?arrow_forwardScenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. As the Marketing Manager for Southeastern Corrugated, what would you do upon receiving the request for quotation from Coastal Products?arrow_forwardA company is considering three vendors for purchasing a CRM system: Delphi Inc., CRM International, and Murray Analytics. The costs of the system are expected to depend on the length of time required to implement the system, which depends on such factors as the amount of customization required, integration with legacy systems, resistance to change, and so on. Each vendor has different expertise in handling these things, which affect the cost. The costs (in millions of $) are shown below for short, medium, and long implementation durations. Use the Excel template Decision Analysisto identify what vendor to select. Decision Alternative Short Medium Long Delphi Inc. $4.00 $4.80 $8.40 CRM International $5.00 $5.75 $7.15 Murray Analytics $4.25 $5.90 $6.30 Fill in the table below for maximum and minimum costs under each alternative. Carry out an analysis considering costs as negative numbers. Round your answers to the nearest cent. Decision Alternative Maximum Minimum…arrow_forward
- make a prioritization matrix with the following five whys:arrow_forwardBuy vs. Lease Equipment Decision Tree Use the information in the table below to decide whether you want to lease versus buy new technology. Calculate expected value of each outcome and show your calculations (Probability X Impact). Explain the best option based on the outcome, and why. The biggest concerns or risks with purchasing technology are the rapid changes that happen in technology and the low end-of-life value of technology. Therefore, there is a 40 percent chance that the leased equipment will have better contractual value at the end of the lease-period . Alternatively, there is an 85 percent chance that purchasing new technology will have a lower-than-expected value at the end of the project life. The cost for the technology, if leased, is $11,500, versus the cost of purchasing a new technology, which is $15,000. Cost to buy a new technology-$15,000 Probability of having lower-than-expected value at the end of the project life.-85% Probability of that the leased equipment…arrow_forwardDLSU 40,000 (COB 5,000; CCS 15%; CLA 20%; COL 5% and others) Average price per computer device Php25,000Average price per Apple device Php30,000 In DLSU, students from COB, COL, and CLA purchased at least one (1) computer device in December 2020. What is the market penetration of computer device in the individual colleges? Given that students replace their computer devices once every 2 years on average, what is the projected market size (units/revenues) for computer devices for these colleges until the end of 2025? What is the concentration of sales/revenue of computer devices among the colleges (CDI)?arrow_forward
- A small manufacturer has won a major contract with the Oman Defence Force to develop a new generation of satellite phone for battlefield applications. Because of the significant technological challenges involved in this project and the company's own size limitations and lack of experience in dealing with the army on these kinds of contracts, the company has decided to partner with another firm in order to collaborate on developing the technology. This decision would be an example of what kind of response to the risk? i of Select one: O Transfer it. O Avoid it. O Accept it O Share it. Minimize it.arrow_forwardCarizick Co manufactures gaming products. It has created a new games console called the QpBox which is about to be launched. Demand for the QpBox is anticipated to be high. The product life cycle of the QpBox is expected to be three years with 300,000 units forecast to be sold during its first year. Sales volumes are expected to decrease by 75,000 units in each subsequent year. Production volumes will be based on expected demand levels. The following costs for the QpBox have been determined: Design and development Pre-launch advertising Advertising in Year 2 Packaging Manufacturing cost $120m $0.5m $0.4m $3 per unit $80 per unit At a recent board meeting, the finance director said that Carizick Co should look to maximise the profitability of the QpBox over its life cycle. The marketing director made the comment that Carizick Co should focus on extending the maturity phase of the life cycle only as this stage is where the QpBox is most profitable. Contract with Zone Co Carizick Co has…arrow_forwardEdwards Machine Tools needs to purchase a new machine. The basic model is slower but costs less, whereas the advanced model is faster but costs more. Profitability will depend on future demand. The following table presents an estimate of profits over the next three years. Demand Volume Decision Low Medium High Basic model $85,000 $115,000 $180,000 Advanced model $50,000 $115,000 $190,000 Fill in the table below for maximum and minimum profit payoffs under each model. Round your answers to the nearest dollar. Decision alternative Maximum Minimum Basic model $ $ Advanced model $ $ Calculate the amounts foregone by not adopting the optimal course of action for each possible demand level. Determine the maximum opportunity cost for each model. Fill in the table below. If your answer is zero, enter "0". Round your answers to the nearest dollar. Opportunity Loss Matrix Future events Decision alternative Low Medium High Maximum Basic model $ $ $ $ Advanced model $ $ $ $ Given the…arrow_forward
- Edwards Machine Tools needs to purchase a new machine. The basic model is slower but costs less, whereas the advanced model is faster but costs more. Profitability will depend on future demand. The following table presents an estimate of profits over the next three years. Demand Volume Decision Low Medium High Basic model $90,000 $110,000 $155,000 Advanced model $60,000 $135,000 $190,000 Fill in the table below for maximum and minimum profit payoffs under each model. Round your answers to the nearest dollar. Decision alternative Maximum Minimum Basic model $ $ Advanced model $ $ Calculate the amounts foregone by not adopting the optimal course of action for each possible demand level. Determine the maximum opportunity cost for each model. Fill in the table below. If your answer is zero, enter "0". Round your answers to the nearest dollar. Opportunity Loss Matrix Future events Decision alternative Low Medium High Maximum…arrow_forwardValue Chain A factory owner in Bangladesh, Tipu Munshi, manufactures clothing for Walmartand other retailers around the world. One of Tipu’s products is a pair of jeans sold to Asda, a Walmartsubsidiary in Britain, which sells the jeans for $US 22.12. Asda Stores Ltd. is the third-largest retailerin the UK, focusing on food, clothing, and general merchandise. Tipu completes each set of jeansat an average cost for materials, labor, and other factory costs plus $0.26 profit, for a total of $7.29each to Asda. The jeans are then shipped to Asda by Li & Fung, a Hong Kong company, for $4.33 perpair. Finally, Asda adds an additional $10.50 of cost and profit, thus arriving at the selling price of$22.12 per pair of jeans.Required Identify the value chain for the Asda jeans. As a manager at Asda, explain how you would usethe value chain to improve the competitiveness and profitability of the business.arrow_forwardSolve the following MIS problems with short brief answers. No MIS Problem Type Solution HERE 1 The Walt Disney Company offers a MagicBand to all customers vising their parks. The MagicBand is a wristband with an RFID chip tracks customer information and location . Disney claim they use it to provide a great customer experience. would you be concerned knowing your personal and location data is being tracked and monitored in real time? Why or why not. Some employees in a company were assigned a project that requires them to work with employees in another country and meet on regular basis to discuss ideas, talk and share documents. Which software would 2 recommend for this type of communication and why? As a Facebook user, you willingly consent that Facebook owns every bit and byte of data you post, and once you press submit, Facebook can do whatever it wants with your data. Do you agree or disagree that Facebook has the right to do whatever it wants with the 3 data? 4 Knowing how…arrow_forward
- Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,Purchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage Learning