Perform an analysis of the problem facing the Oceanview Development Corporation,
ID: 429532 • Letter: P
Question
Perform an analysis of the problem facing the Oceanview Development Corporation, and prepare a report that summarizes your findings and recommendations. Include the following items in your report: 1. A decision tree that shows the logical sequence of the decision problem 2. A recommendation regarding what Oceanview should do if the market research information is not available 3. A decision strategy that Oceanview should follow if the market research is conducted 4. A recommendation as to whether Oceanview should employ the market research firm, along with the value of the information provided by the market research firm Include the details of your analysis as an appendix to your report.Explanation / Answer
Managerial Report
1.
Using information given in the question article, a decision tree can be drawn to help make a decision and shows the logical sequence of the decision problem.
Decision Tree:
Figure 1
The zoning only occurs when Oceanview bids and wins. There is no other option if Oceanview does not bid, the decision tree will end.
2.
It is highly recommended for Oceanview to continue and bid if there was no market research conducted. This is because the expected value of that decision is $50,000. To make this clear, a decision tree is drawn. The option is shown in node 8 of the decision tree below.
Decision Tree:
Figure 2
3.
It is a suggested strategy for a market research to be conducted first. Following the decision tree in Figure 2, we predict that the expected value of the market research is higher than the cost of conducting the research itself. We could conclude as below:
4.
It is recommended for Oceanview to employ the market research firm. It is predicted this strategy expected value is $78,993including the cost of conducting the market research. With this the market research has a value of $78,993 - $50,000 = $28,993. This is favourable to Oceanview.
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