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Microsoft Word - Homework_7_F_08

Microsoft Word - Homework_7_F_08 - BUAD 311T Homework 6 1...

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1 BUAD 311T Homework 6 1. Decision Tree A national chain of quick-service restaurants has developed a new specialty sandwich. Initially, it faces two possible decisions: - invest 200 million dollars to introduce the sandwich nationally - invest 30 million dollars to evaluate it in a regional test market If it introduces the sandwich nationally, the chain might find either a high or low response to the idea. In a high response scenario, the chain will make 700 million dollars. In a low scenario, the company will make 150 million. It is estimated that there is a 60% chance that the national response is high, and a 40% that the national response is low. If it starts with a regional marketing strategy, it might find a low response or a high response at the regional level. This may or may not reflect the national market potential. In any case, the chain needs to decide whether to remain regional, market nationally, or drop the product. It is estimated that there is a 70% probability that the regional response is high, and a 30% probability that it is low.
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