- Messages
- 6
- Reaction score
- 0
- Points
- 0
Me and my teacher have a slight dispute over the answer to the following decision tree :
Ms. Lulu Rocher is facing a difficult decision. Should she put money into launching a new product or modifying the existing product range ? She knows she has to do something because the sales of the Beauty cosmetic range have been rather disappointing recently. Lulu is the marketing director of the cosmetic division of Portello, a company which produces a wide range of products from toilet rolls to toothpaste. Lullu has to present a proposal to the directors of the company outlining her plans for cosmetics.
She has estimated costs and estimated profits as below:
Launching a new product- intial costs $2mn; likelihood of success 0.3;likelihood of failuire 0.7; the expected outcome if the product is successful is $8mn; if the product fails the company could lose $2mn
If the company succeeds, it may take up further product development at a cost of $50,000, the chance of success of which could be estimated to be 50% with an outcome of either a positive or negative $2m.
Modifying the existing range: the initial costs $1m; the likelihood of a significant increase in sales is 0.6;the likelihood of a relatively low increase in sales in 0.4;the expected profit if sales are much higher is $3m: if sales increase is relatively low the expected profit is $1.2m.
i. Construct a decision tree highlighting the options available to Ms. Rocher.
ii. On the basis of your decision tree which option should Ms. Rocher take? Jusitfy your answer .
Could anyone please post the answer here or mail it to me at [email protected]
Ms. Lulu Rocher is facing a difficult decision. Should she put money into launching a new product or modifying the existing product range ? She knows she has to do something because the sales of the Beauty cosmetic range have been rather disappointing recently. Lulu is the marketing director of the cosmetic division of Portello, a company which produces a wide range of products from toilet rolls to toothpaste. Lullu has to present a proposal to the directors of the company outlining her plans for cosmetics.
She has estimated costs and estimated profits as below:
Launching a new product- intial costs $2mn; likelihood of success 0.3;likelihood of failuire 0.7; the expected outcome if the product is successful is $8mn; if the product fails the company could lose $2mn
If the company succeeds, it may take up further product development at a cost of $50,000, the chance of success of which could be estimated to be 50% with an outcome of either a positive or negative $2m.
Modifying the existing range: the initial costs $1m; the likelihood of a significant increase in sales is 0.6;the likelihood of a relatively low increase in sales in 0.4;the expected profit if sales are much higher is $3m: if sales increase is relatively low the expected profit is $1.2m.
i. Construct a decision tree highlighting the options available to Ms. Rocher.
ii. On the basis of your decision tree which option should Ms. Rocher take? Jusitfy your answer .
Could anyone please post the answer here or mail it to me at [email protected]