Battle Pacific and Space Pirates - Report Example

Contents Executive summary 3 Video Tech Background 3 Main body: Decision tree 4 Formulation 5 Recommendations 6 Risk profile of the recommend decision 7 Sensitivity analysis results 8 Works Cited 8 Appendix1 9 Appendix 2 9 Appendix 3 10 Executive summary This is a managerial report that is prepared my managers who intend to give comprehensive information to their supervisors about business decision, the advancement of various departments in an organization, and broader outlook in the near future. The document puts into consideration various factors that add up to the decision making of the product for marketing. There are one of two games which named Battle Pacific and Space Pirates will be marketing by Video Tech Company. The paper uses risk analysis and sensitivity analysis of the two products individually to determine probability of marketing one of the products. Battle Pacific is a game that has no competition while Space Pirates has complex situation. A decision tree is important for the process as illustrated in the text, which was drawn using application software; excel due to lack of a v-lab. Video Tech Background Video Tech Company is in an endeavor to establish one of two of new video games in the market for the coming season. The games are entitled Battle Pacific and Space Pirates. Battle Pacific is a special and distinctively original game without competitors around. However, Video Tech Company believes there is 0.6 probability that they are competitors will introduce a game which is very similar with Space Pirates. This is a report that is prepared my managers with an intention of giving comprehensive information to their supervisors about business decision, the advancement of various departments in an organization, and broader outlook in the near future. Main body: Decision tree Presentation of management decision problem as a tree decision that shows logical sequence of the decision problem d1= High Demand $1000 p(d1)=0.2 Battle Pacific d2=Medium Demand $700 p(d1)=0.5 d3= Low Demand $ 300 p(d3) = 0.3 d1=High Demand $1600 p(d1) = 0.5 Space Pirates Without Competition d2= Medium Demand $800 p(d2) = 0.3 d3= Low Demand $ 400 p(d3) = 0.2 d1 = High Demand $800 p(d1) = 0.3 Space Pirates With Competition d2 = Medium Demand $400 p(d2) = 0.4 d3= Low Demand $200 p(d3) =0.3 Formulation Formulation of the recommendation of one of the two video games is based on the expected values and probabilities. In order to find the best alternative video game, then we have to calculate the expected value for each video game, that is the expected value for; battle pacific, space pirates without competition and space pirates with competition. After finding the expected value for each of the video game, then we have to choose and recommend on the video game with the highest expected values amongst the video games. In calculating the expected value for each video game, we multiply probabilities with its profits at particular level that is, high level, and medium level and at lower level. In addition, from the computations we pick on the video game with high expected values will be what will be recommended. Battle Pacific Expected Value (d1) = 0.2 * 1000 + 0.5* 700 + 0.3 * 300 = $ 640 Space Pirates without Competition Expected Value (d2) = 0.5 * 1600 + 0.3 * 800 + 0.2 * 400 = $ 1120 Space Pirates with Competition Expected Value (d3) = 0.3* 800 + 0.4* 400 + 0.3*200 = $ 460 based on the decision making with probabilities approach we defined the largest expected profit value = $1120 ($1120 > $640 > $460) of the decision alternative d2 as the recommended decision alternative, as it is greater than expected value (d1) and expected value (d3). Recommendations From the analysis illustrated above of the two games expected value has been calculated. The result of each game is expecting value of $640,000 while Battle Pacific expects values of $724, 00 of Space Pirates. It is evident from the result that Space Pirates has higher value compared to Battle Pacific. My recommendation would be propose Space Pirates to market. Risk profile of the recommend decision The risk profile for the space pirates without competition decision alternative (d2) indicate no probabilities for a loss, hence, d2 would greatly be considered less risky than (d1) and (d3). Due to this, comparison of all the expected values and risk profiles of the decision alternatives the person person making the decision might prefer the preferred alternative of(d2). These risks can relate various aspects as; increasing commodity cost, issues to deal with supply that is transportation issues. They are issues to deal with contract compliance and also issues to do with demand that is transportation and decreasing demand. Environmental forces do contribute a lot to risk profile that is competitive forces. Important to note also are issues to do with inventory and mismanagement, which can all lead to greater risks that the decision maker ought to put into consideration in order to make an informed decision and to avoid greater risks (Godin, 2006). Using the sensitivity analysis to determine what the probability of the competition for space pirates would have to have one to change their recommended decision alternative. The initial probabilities of (d2) are p(high)=0.5, p(medium)=0.3 and p(low)=0.2 and the probabilities of d3 are p(high)=0.4, p(medium)=0.4 and p(low)=0.3 of they give the following expected values; Expected Value (d2) = 0.5 * 1600 + 0.3 * 800 + 0.2 * 400 = $ 1120 Expected Value (d3) = 0.3* 800 + 0.4* 400 + 0.3*200 = $ 460 Combining the probabilities of d2, p(high)=0.5 and p(medium)=0.3 = 0.8 and combining the probabilities of d3, p(high)=0.3 p (medium)=0.4=0.7 EV (d2) = 0.8(1600) + 0.2(400) =1360 EV (d3) = 0.7(800) + 0.3(200) = 620 After combining the initial probabilities, we now have to interchange the combined probabilities to attain their expected values. The analysis of resultant expected values gives us the sensitivity analysis, of which the choice of one of the two video games will change the state of recommendation from space pirates with competition to space pirates without competition. EV (d2) = 0.2(1600) + 0.8(400) =640 EV (d3) = 0.3(800) + 0.7(200) = 380 Sensitivity analysis results If the probability of the competition being is Read More