BACKGROUND This study will focus on the decline in growth of one of the leading publisher of trade magazines in the

industry named Atwater Publication, Inc. Having an increase of growth rate for the past years, the company experienced a drop in growth compared to the last revenues. Atwater Publication, Inc. has been on the business for over 50 years. Their publication includes Steel Industry, Electrical Equipment, Hotel Supplies, Electronics Monthly and Hospital Management. But for the last 2 years, their sale revenues declined and were retained on a steady rate of 2%. In response to this, the board of directors suggested that the company should consider expanding the areas of interest of the publications and shall focus in those that are outside of the trade field. After this suggestion, a number of proposals were given to the president of the company, Charles Benson. The most favourable proposal was from Anne Wilson, Director of Marketing. Anne Wilson proposed a monthly womens magazine which centres to the issues, problems, and challenges facing todays younger women. She developed a demand forecast which was met by several advertising agencies in New York City and guarantees advertising revenues of $30, 000 per issue. With this movement, Mr. Benson was set to prepare the quantity to be printed for the first issue and estimate the quantity for the remainder of the issues. In addition this would give him the opportunity to confirm the profitability of Ms. Wilsons proposal. However, based on the proposal of Ms. Wilson, the first issue should be release with 200,000 copies and to be distributed in newsstands, supermarkets and drugstores. Mr. Benson, on the other hand, thinks that 50, 000 copies should be printed and considers the first issue as a trial run for them to distinguish its profitability. Thus, he referred to the possible cost of the project and considers it as the most costly project that the publication had. He had also prepared a profit and loss statement of the project which is limited to 50, 000 and found out that it may result to a loss of $2, 000 which may further result to the decline in growth. STATEMENT OF PROBLEMS The President, Mr. Charles Benson, is considering the proposal of the Director of Marketing, Anne Wilson that may change the demand in growth of the publication. With this, the main problem is which of the following quantities of printed issues is advisable for the profitability of the publication, is it the 50,000, 100,000, 150,000, or 200,000 copies.

ANALYSIS Decision Analysis is a management technique in which statistical tools such as decision tree analysis, multivariate analysis, and probabilistic forecasting are applied to the mathematical models of real-world problems. The objective of a decision analysis is to discover the most advantageous alternative under the circumstances.1 From the figures given in the case, we arrived with the data as follows: Alternative s 50 000 Copies 100 000 Copies 150 000 Copies 200 000 Copies Net Revenue 5 0,000 10 0,000 15 0,000 20 0,000 18,000 78,000 1 38,000 2,000) Gain Loss (

Computation for the Net Revenue for each alternative 50, 000 Copies Net Revenue($1/copy) Additional Staff Administrative Cost Promotion Printing 10 000 Fixed Cost 0.20 / Magazine Total Gain: Loss: 100, 000 Copies
1

50,00 0 20,00 0 2,0 00 10,00 0 10,00 0 10000 52,00 0 0 -2000

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Net Revenue($1/copy) Additional Staff Administrative Cost Promotion Printing 10 000 Fixed Cost 0.20 / Magazine Total Gain: Loss: 150, 000 Copies Net Revenue($1/copy) Additional Staff Administrative Cost Promotion Printing 10 000 Fixed Cost 0.20 / Magazine Total Gain: Loss:

100,00 0 20,00 0 2,0 00 10,00 0 10,00 0 20000 62,00 0 38,00 0 0

150,00 0 20,00 0 2,0 00 10,00 0 10,00 0 30000 72,00 0 78,00 0 0

200,000 Copies Net Revenue($1/copy) Additional Staff Administrative Cost Promotion Printing 10 000 Fixed Cost 0.20 / Magazine Total Gain: Loss: 200,00 0 20,00 0 2,0 00 10,00 0 10,00 0 40000 82,00 0 118,00 0 0

We can make decisions in two environments. 1. Decision Making Under Certainty 2. Decision Making Under Uncertainty Decision Making Under Certainty In this environment, we already know what is best for us. We know the alternatives and results and we choose the best naturally. Base from the table, the best option is to produce 200, 000 copies for the first issue. Decision Making Under Uncertainty In this environment, probability is not given. So we have the five situations under which we can make decisions. 1. Maximax 2. Maximin 3. Criterion of Realism 4. Equally Likely

Maximax: We usually use the optimistic or positive thinking approach here. We will choose which will give us maximum payoff. Alternative s 50 000 Copies 100 000 Copies 150 000 Copies 200 000 Copies Net Revenue 5 0,000 10 0,000 15 0,000 20 0,000 18,000 78,000 1 0,000 0,000 20 38,000 0,000 15 (2,000) 50,000 10 Gain Loss Maximum in Row

If we are taking decision under Maximax, we will go for the 200, 000 copies. Maximin: Maximin is the totally opposite to the Maximax. In this environment, we take the pessimistic approach. In this scenario, we will take the lowest payoff which will be like decreasing the risk factor. We will see the value which will be minimum in a row. Now take the above table. Alternative s 50 000 Copies 100 000 Copies 150 000 Copies 200 000 Copies Net Revenue 5 0,000 10 0,000 15 0,000 20 0,000 18,000 78,000 1 0,000 0,000 20 38,000 0,000 15 (2,000) 50,000 10 Gain Loss Maximin

If we look at the above table, we will come to know that we will choose the 50 000 copies option. It is the lowest value which is kind of minimum risk.

Criterion Of Realism: In this situation, we are given the percentage of either pessimistic or optimistic. For 50,000 copies we have 10% likelihood, 100, 000 copies - 20% likelihood, 150, 000 copies 40% likelihood, and 200,000 copies 30% likelihood. So the probability will be: 50 000 copies : 0.1 optimistic and 0.9 pessimistic 100 000 copies: 0.2 optimistic and 0.8 pessimistic 150 000 copies: 0.4 optimistic and 0.6 pessimistic 200 000 copies: 0.3 optimistic and 0.7 pessimistic The formula of calculating weighted average is Weighted Average = (Maximum in a row) + (1-) (Minimum in a row) Where a = optimistic Alternative s 50 000 Copies 100 000 Copies 150 000 Copies 200 000 Copies Net Revenue 5 0,000 10 0,000 15 0,000 20 0,000 18,000 78,000 1 60,000 60,000 38,000 20,000 (2,000) 3,200 Gain Loss Weighted Average

In this pattern, we will take the higher realism value among all the alternatives. In this table we will take 60 000. That means we will produce 200 000 copies for it possess a higher value of gain. Equally Likely (Laplace): Equally likely criterion uses the average outcome. One criterion that uses all the payoffs for each alternative is equally likely. It is also called Laplace decision criterion. This involves finding the average payoff for each alternative and selective the alternative with the highest average. The equally likely approach assumes that all probabilities of occurrence for the states of nature are equal and thus each state of nature is equally likely.

Alternative s 50 000 Copies 100 000 Copies 150 000 Copies 200 000 Copies

Net Revenue 5 0,000 10 0,000 15 0,000 20 0,000 -

Gain

Loss (2,000) 1 -

Criterion of Realism 16,000 46,000 79,000 106,000

38,000 78,000 18,000

The highest average from the table above is 106, 000 which means we should produce 200 000 copies. Conclusion Based on the quantitative analysis of the study, it is seen that the computations favour more of the option under 200, 000 copies. Recommendation Mr. Charles Benson disagree with the proposal of Ms. Wilson to produce 200, 000 copies for the first issue of the magazine but the researcher recommends that Mr. Charles should choose the 200,000 copies option. It can give him the maximum profit that he want. If this will be the case, there is a high percentage for the publication to increase their growth for the next years.