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Techware Incorporated is considering the introduction of two new software products to the market. In particular, the company has four options regarding these two proposed products: introduce neither product, introduce product 1 only, introduce product 2 only, or introduce both products. Research and development costs for products 1 and 2 are $180,000 and $150,000, respectively. Note that the first option entails no costs because research and developments efforts have not yet begun. The success of these software products depends on the trend of the national economy in the coming year and on the consumers' reaction to these products. The company's revenues earned by introducing product 1 only, product 2 only, or both products in various states of the national economy are given below. The probabilities of observing a strong, fair, and weak trend in the national economy in the coming year are 0.30, 0.50, and 0.20, respectively

a. Use PrecisionTree to identify the strategy that maximizes Techware expected net revenue.

b. Perform a sensitivity analysis on the optimal decision, letting each of the inputs vary one at a time plus or minus 25% from it base value and summarize your findings. Which of the input appears to have the largest effect on the best solution?

Operation Management, Management Studies

  • Category:- Operation Management
  • Reference No.:- M92472575

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