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Quantitative Decision Making - Essay Example

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Summary
Not produce platforms if the market research predicts low sales. Therefore, In the eventuality that the market research report predicts a low sales forecast, the company will abandon project thereby limiting their loss by 12,203
The viability of the project depends on the demand for the product post commercialisation…
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Quantitative Decision Making
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Download file to see previous pages Therefore, the expected value of producing the platforms commercially is 17,000.
We have evaluated the option of conducting further research to make a more knowledgeable decision. Based on our previous experience we know that the research report could either predict high or low sales or could be inconclusive. There is previous data to prove that the research reports do not always accurately predict sales. After working out the probability of high and low sales based on the likely result of the market research and the probability of it being accurate, we realize that
...
There are three routes that we can take.
1. Decide to produce platforms without market research
2. Conduct market research to decide way forward
3. Abandon commercialisation of the platform

The viability of the project depends on the demand for the product post commercialisation. Given our past experience with launches of similar products, we know that the probability of high sales of such products is 30%.
Our assessment of the profits from this project in case of high sales is 150,000. If the demand for the product is low, we stand to loose 40,000. Therefore, the expected value of producing the platforms commercially is 17,000.
We have evaluated the option of conducting further research to make a more knowledgeable decision. Based on our previous experience we know that the research report could either predict high or low sales or could be inconclusive. There is previous data to prove that the research reports do not always accurately predict sales. After working out the probability of high and low sales based on the likely result of the market research and the probability of it being accurate, we realize that
if we decide to go ahead and produce platforms based on market research, the expected value of the project will be 22,001. Therefore, the cost of the research can be valued at 5001.
If the market research report predicts low sales and we do not produce the platforms, we would have incurred a cost of research

The following factors need to be taken into account while deciding whether to produce or abandon the platforms project before or after conducting research :
Expected value of producing the platforms without research - 17,000
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