Decision Analysis

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MM305M4 Competency Assessment – Part 2

 

This portion is a written assignment. It is being used to assess GEL-1.02: Demonstrate college-level communication through the composition of original materials in Standard English.

 

Use Microsoft Word to complete this assignment. When you are ready to submit your completed assignment, select the “Assignments” link on the navigation bar at the top of your screen. Next, select “Assessment Dropbox” for the appropriate assignment. Then select the “Add a file” button at the bottom of the screen to submit your file(s).

 

Scenario: You are a business owner faced with an important decision that could potentially be very lucrative. Keep in mind the “Six Steps in Decision Making” as you set up your decision analysis.

For this part, you will be asked to compose an essay to address the following questions:

  1. Create a scenario in which your business needs to make a decision.
  2. Identify at least three alternatives and three states of nature for the decision.
  3. Create a decision table in Excel that includes:

â—‹     the alternatives

â—‹     the states of nature

â—‹     the potential payoff/losses for each alternative

â—‹     Note: These fictitious amounts should be based on any information you feel is pertinent in your business decision making.

  1. Include the payoff table in the essay and as an attachment to the discussion board.
  2. Choose one of the three decision strategies:

â—‹     Optimistic

â—‹     Pessimistic

â—‹     Criterion of Realism

  1. For the decision strategy chosen above:

â—‹     List the best payoff.

â—‹     List the alternative to use based upon the payoff.

â—‹     State why the decision strategy was chosen.

  1. Indicate your final decision.

After you have contemplated the questions above, write your essay including the answers to all of the questions above. All essays should:

●      have an introduction, body, and conclusion.

●      have three or more body paragraphs.

●      end with a conclusion paragraph tying all of your ideas together, stating the final decision made, and why that decision was reached.

The essay should be at least five paragraphs in length.

See guidance for a payoff table and starter phrases for an essay. You can also view a Competency Assessment starter video to assist you with the Module 4 Competency Assessment in the Module 4 LiveBinder.

 

The link for the Guidance:

https://kapextmediassl-a.akamaihd.net/genEd/MM305ET/2203A/MM305M4_CAPt2_Guidance.pdf

 

MM305M4 Competency Assessment – Part 2 Guidance

These responses are meant to be a guide on how to address part 2 of the competency assessment and do not include all possible responses.

1. I am the business owner for my personal juice/smoothie business, “The New Green!” I have smoothie carts in various locations around town. Business has been going very well and I am considering expanding my business to our neighboring town.

2. Three alternatives would be: 1. Expand fully to neighboring town with 3 new smoothie carts 2. Pilot the expansion with just 1 new smoothie cart 3. Stay status quo – do not expand (Make the customers come to me!)

Three states of nature would be: 1. Serious demand for good nutrition 2. Moderate demand for good nutrition 3. Nobody cares about good nutrition

3 & 4. On a typical “awesome” day, I sell about $250 in smoothies per cart and it costs about $100 for electricity and staffing. So, a net income of about $150 per day.

On a typical “moderate” day, I sell about $150 in smoothies per cart and it still costs about $100 for electricity and staffing. So, a net income of about $50 per day.

On a typical “poor” day, I sell about $50 in smoothies per cart and it still costs about $100 for electricity and staffing. So, a net loss of about $50 per day.

I will set up my decision table based on the above profit/losses per smoothie cart.

5. I will choose to use the Criteria of Realism strategy.

For the Criteria of Realism (Hurwicz), I will use a coefficient of realism of α = 0.75. As a reminder, this means that I will be 75% optimistic and 25% pessimistic – a compromise between the optimistic and pessimistic strategies. The Criteria of Realism decision is to build 3 new carts, based upon the decision strategy’s alternative value of 300.

Essay:

I am the business owner for my personal juice/smoothie business, “The New Green!” I have smoothie carts in various locations around town. Business has been going very well and I am considering expanding my business to our neighboring town.

Before making my decision I am going to examine my alternatives …. Because of how my business operates I choose to use the strategy …

Here is an examination of a table that has the potential payoffs/losses. This table is indicating to …

My final recommendation is …

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