Probability Theory in Decision Making - Essay Example

Recently, the company is considering selling fruit juices along with coffee at the ongoing south-Asian food festival in mumbai. The present report isto study the feasibility of such a venture. The company had conducted some research based on some historical data, the results of which are tabulated as shown here under.CoffeeTime is considering selling juices along with its other products. States of NatureHigh SalesMed. SalesLow SalesA (0.2)B (0.5)C (0.3)A1(Sell juices)30002000-6000A2(Don't sell juices)000 The results are very clear to interpret from the following table.

The probabilities for the sales show that the company is expected to register medium sales as far as the sale of fruit juices is concerned (highest probability of 0.5). The table further depicts that there is fairly lesser chance that there would be any phenomenal sale of fruit juices (p=0.2). The decision has to be made on the following conditions:1) The amount of profit earned.2) The probability of the sale of juice. Firstly, it must be understood that the sale of juice by coffeeTime is a move to just boost the revenues of the company in the ongoing food festival.

The second row (A2) of the table just goes to show that. The nil entries in all the 3 rows signify that any decision of the company against selling fruit juice will have no impact on the sales of coffee, which of primary interest to the company rather than selling fruit juice. There is also an interesting observation from the first row (A1). This row depicts that the sales for fruit juice are expected to register figures of a mere Rs.2000-3000 in the case of the mid-high range respectively. But, if the company suffers a low turnout, then the expected loss ifs around Rs.6000. This is much more than the sales for the highest possible sales turnover as has been previously mentioned.

All this goes to show that the company is less likely to benefit in any major way and more likely to incur a loss in the eventuality of selling fruit juice. Thus, it is advisable not to proceed with the proposed plan of selling fruit juice at the south-Asian food festival.b. Firstly, the company can use the Bayesian logic for making any analysis only from data collected from other countries where it has its operations currently. This is because CoffeeTime is new to India and as such gathering any past historical data from the cities around mumbai is not possible.

Generally any Bayesian analysis uses past experience, guesses or convenient assumptions in the form of a prior distribution. Under the present situation, the company is basically interested in calculating the profits involved in selling a particular brand of coffee in Mumbai. The usefulness of applying the Bayesian logic using the data collected from the other countries where CoffeeTime operates its outlets can be understood from the application of the Bayes and the empirical Bayes method to estimating values of unobservable quantities.

For example, it is imperative that the sales of the company in all countries are not uniform. It is high in some companies at some period of time, while it is low in other countries. As such, when all this data is pooled and the Bayesian logic is applied to it, then we can estimate the probability of the sales that the company is likely to register in that particular country (for which the figures were presently not available, the present case being India). The Bayesian logic can therefore be applied to any area where one wishes to conduct a probabilistic analysis.

Such an analysis will help the company to plan its future course of action, regarding what it must and must not do in order to successfully launch the outlets in India and pave the way for a successful overseas expansion of CoffeeTime.Review of Current Strategy The present strategy of Coffee in mumbai is solely focused on introducing the brand into the local market through participation in the South-Asian Food Festival. But we feel that there can be a modification to this approach. From a historical perspective, the Indian public is known to be highly receptive to advertisements through popular channels like TV, Newspaper etc.

Major market player in India rely on heavy advertising for booting sales and profits and most have proved successful in this regard. As such, we would like to recommend that the company can instead focus on using the medium of advertisements to promote the brand in India, if it is serious about setting up shop there. Another popular approach to popularizing the brand in India would be to introduce some innovative schemes like weekly lucky draws for customers with purchases beyond a certain limit, foreign trips to lucky customers etc.

Such schemes are known to drive people into buying products and this has been proving successful for companies in most markets. Therefore, we are of the view that the adoption of the above recommendations will ensure that the brand will gain popularity in the Indian Market within a short span of time if and only if it were execute carefully and efficiently. REFERENCES1) Simon Tavare (2001), Lectures on Probability Theory and Statistics. London: Oxford University Press