Management Science

nd
2 semester AY 2021-2022

Feedback/ Assessment

Name: Dungca, Julie Mae O. Date: March 17, 2022

Course: BS Accountancy 1B Score: _______________

Exercise 2.0

Problem. Company A would like to offer a new product (product A) in the market.
What should the company do? How should the company introduce the product to
the market? Try to list down at least 3 alternatives applying the 7 steps in decision
making process. Please enumerate the steps 1 by 1. Discuss briefly.

(20 points)

1. IDENTIFY THE PROBLEM

Company A would like to offer a new product to the market, but the problem is the
entity doesn’t know how to introduce the product to the market. What possible
strategy must they come up with?

2. DETERMINE THE CRITERIA THAT CAN SOLVE THE PROBLEM.

Company A may now gather relevant information that could solve its problem. To
do this, they must first identify their target costumer or for whom is the Product A
for; is it for kids, teenagers, or for adults. And of course they must also consider
their budget; on how they will finance everything that they need for the project.
And lastly, how they introduce it to the market; whether through different social
media platforms and hire social media influencers or make a flyers or posters or the
combination of both.

3. SEARCH FOR THE DIFFERENT POSSIBLE ALTERNATIVES

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There are three possible alternatives in introducing the product to the market; (1)
Social media marketing, (2) Print media marketing (3) Combination of both.

4. EVALUATE EACH ALTERNATIVES

(1) Since a lot of people are using social media, it is more likely that we reach
sheer number of people. It is cheaper and much easier and faster to disseminate
information because the more share and likes will increase the products recognition.
It is also much more cost-effective than traditional marketing. However, social
media marketing also needs to have a huge amount of followers or need to hire an
influencer for the product to be recognized. You need to have a great content and
idea for people to like your product. Additionally, social media marketing is a long
term investment. It is successful strategy but it takes time.

(2) Print media marketing is flexible to establish credible trust of customers. It

is tactile and appealing to visual customers. It is best for local targeting and it can
sometimes reach and target individuals that digital media can’t. However, people
nowadays prefer digital than print media advertisement. Print media is not for a
global audience and it requires a lot of exposure, planning, has higher cost and
requires longer lead time.

(3)Combination of both digital and print marketing is a great way to boost our
audience reach. Traditional marketing is still leverage because not all people can
access the internet. Combining both might be the best decision, but there are cons.
It is more expensive, requires a lot of effort and planning.

5. SELECT THE BEST ALTERNATIVE

Combination of both is the best alternative. Yes there are still cons, but there are
more benefits that you can acquire by choosing this alternative.

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6. IMPLEMENT THE CHOSEN ALTERNATIVE

To implement the alternative, the company must make a plan. Create two teams
that will handle the digital marketing and print media marketing. In digital
marketing, we can pay influencers to acquire wide range of audiences and post it
on different social media platforms like facebook, twitter, instagram, youtube and
etc. While in print media marketing, we can use a flyer, posters, newspapers etc.
and disseminate it to public places. We can also bring our social media content to
our in-store displays.

7. MONITOR THE IMPLEMENTATION

To monitor the company’s decision we need to conduct a survey if the product has
really reached the audiences. Do people recognize the product? Are they
demanding for it? Did the company boost its sales? If yes then company A must
continue using digital and print marketing for advertisement. If not, then stop using
both alternatives and think again for another strategy.

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 Management Science
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2 semester AY 2021-2022

Feedback/ Assessment

Name: Dungca, Julie Mae O. Date: March 17, 2022

Course: BS Accountancy 1B Score: _______________

Exercise 2.1

1. Next year, the lease contract of Parrenos’ Grill Restaurant is about to expire.
Steve, the owner, must decide whether to renew the contract for another five
(5) years or relocate near the site of a proposed restaurant. The city engineer is
currently confused on the merits of granting approval to the restaurant. A
business consultant has estimated the present value of the Parrenos’ Grill
Restaurant as shown below for the two alternatives.

Alternatives Approve Disapprove

Renew the contract P750,000 P4,500,000
Relocate the restaurant P6,500,000 P300,000
Probability 55% 45%

1. What course of action would you recommend using each of the following
strategies? State the pay-off and decision. (40 points)

a. Maximax
Alternatives Maximum in a row

Renew the contract 4,500,000

Relocate the restaurant 6,500,00

Pay-off: P6,500,000
Decision: Since the maximum among the maximum values refers to the
alternative, Relocate the restaurant, therefore Steve will relocate the
restaurant.

b. Maximin

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Alternatives Minimum in a row

Renew the contract 750,000

Relocate the restaurant 300,000

Pay-off: P750,000
Decision: Since the maximum among the minimum payoffs refers to the
alternative, Renew the contract, therefore Steve will renew the contract.

c. Laplace

Alternatives Row Average

Renew the contract 2,625,000

Relocate the restaurant 3,400,000

Pay-off: P3,400,000
Decision: The maximum average refers to the second alternative, which is to
Relocate the restaurant.

d. Minimax Regret Strategy

Opportunity Loss Tables

Alternatives Approve Disapprove

Renew the contract 6,500,000 - 750,000 = 4,500,000 - 4,500,000 =

5,750,000 0

Relocate the restaurant 6,500,000 - 6,500,000 = 4,500,000 - 300,000 =

0 4, 200,000

Alternatives Maximum in a row

Renew the contract 5,750,000

Relocate the restaurant 4,200,000

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Pay-off: P4,200,000
Decision: Applying the Minimax Strategy, the decision of the company should
be based on the alternative with the minimum regret. Thus, from the
Maximum Regret column, the minimum is 4,200,000 indicating the best
decision under this strategy is to Relocate the restaurant.

e. Hurwicz (assume α = 65%)

Renew the contract

Weighted Average = (.65) (750,000) + ( 1- .65) (4,500,000)
= 487,500 + 1,575,000
= 2,062,500
Relocate the restaurant
Weighted Average = (.65) (6,650,000) + ( 1- .65) (300,000)
= 4,225,000 + 105,000
= 4,330,000

Alternatives Criterion of Realism

(α = 65% or .65)

Renew the contract 2,062,500

Relocate the restaurant 4,330,000

Pay-off: P4,330,000 (realism)

Decision: The best alternative is to relocate the restaurant.

f. Construct a Decision tree

EMV (Renew the Contract) = (.55) (750,000) + (.45) (4,500,000)

= 2,437,000
EMV (Renew the Contract) = (.55) (6,500,000) + (.45) (300,000)
= 3,710,000

Alternatives EMV

Renew the contract 2,437,0000

Relocate the restaurant 3,710,000

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Pay-off: P3,710,000
Decision: Under this strategy, the best decision is to Relocate the restaurant
because it has the highest expected value.

STEVE DECISION TREE

Approve (55%)
P750,000 = P412,500

P2,437,500 Disapprove (45%)

P4,500,000 = P2,025,000
Relocate
the
Restaurant

Approve (55%)
P6,500,000 = P3,575,000
P3,710,000
Disapprove (45%)
P300,000 = P135,000

2. What course of action would you recommend using decision making under
certainty?

Since the decision-maker knows the consequences of every alternative or

decision choice under certainty, the best course of action that the company may
apply is the Maximax Criterion. Being optimistic in identifying the suitable
alternative is beneficial where the quality decision can be concluded. In addition,
decision-maker should also follow the stepby-step decision making processes in
order to cohere the different stages, different information which can be utilize in
constructing decision.

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