- 15 Marks
PM – Nov 2021 – L2 – Q6 – Decision-Making Techniques
Explain methods to help choose the optimal marketing package under uncertainty and risk for Mr. Alade’s business.
Question
Mr. Alade, the owner of a business, has been attending a course on scenario planning and decision-making. As a result of that advice, he has produced, using cost, volume, and profit analysis, 12 scenarios for a new product that the business will launch in the near future. There are four possible marketing packages (A, B, C, or D), and three possible market conditions (poor, average, or good) that could be encountered. The Net Present Value (NPV) of the cash flows resulting from each of the scenarios is shown in the table below:
| Market Package | A | B | C | D |
|---|---|---|---|---|
| Market Conditions | N’000 | N’000 | N’000 | N’000 |
| Poor | 180 | 230 | 220 | 190 |
| Average | 190 | 200 | 210 | 275 |
| Good | 550 | 260 | 210 | 500 |
Mr. Alade missed the session on how to deal with risk and uncertainty. He sent this table to the course tutor, who advised him to review the methods under the “Uncertainty” section. If he can estimate the probability of each market condition, he should use “Risk-based methods.” The decision will be influenced by Mr. Alade’s attitude towards risk.
Required:
Explain FOUR methods that could help Mr. Alade decide which marketing package to choose. Include THREE methods to deal with uncertainty and ONE method to deal with risk, explaining the attitude associated with the decision-maker for each method.
Find Related Questions by Tags, levels, etc.
- Tags: Decision Making, Risk, Scenario Planning, Uncertainty
- Level: Level 2
- Topic: Decision-making techniques
- Series: NOV 2021