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Decision analysis . New product and new business launch

Decision analysis . New product and new business launch. Tomasz Brzęczek Ph.d . Poznan University of Technology. Steps in decision analysis. Clearly define the problem at hand List all possible decision alternatives

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Decision analysis . New product and new business launch

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  1. Decisionanalysis.New product and new business launch Tomasz Brzęczek Ph.d. PoznanUniversity of Technology

  2. Steps in decisionanalysis Clearlydefine the problem athand List allpossibledecisionalternatives Identify the possiblefutureoutcomes / states of nature for eachdecisionalternative Identify the payoffforeachcombination of alternatives and outcomes: profit, cost, nonmonetarypayoff. Select decisionanalysistechnique and applyit to makeyourdecision

  3. Decision-making environment • Decisionmakingundercertainty • Decisionmakingunderuncertainty • Decisionmakingunderrisk

  4. Payofftable for profits (thous. €) Whether to expand business by manufacturing and marketing a newproduct MaxiMax MaxiMin Criterion of realism (Hurwiczrule), αisa weight of optimism from [0, 1] Realisticvalue for small plant decision of slightlypesimistic John is: 0,4 * 90 + (1 – 0,4) * (-20) = 24 Equallylikely (Laplace) 5. MinMaxRegret

  5. ExpectedMonetary Value of possiblepayoffs of decisioni − probability of outcomej, − payoff from decisioni in outcomej.

  6. Decisiontree ManagerialDecisionModeling. Balakrishnan N., Render B., Stair R.M.

  7. VarianceS2 and standard deviationS of decisioni payoffsXi − probability of outcomej, − payoff from decisioni in outcomej.

  8. Multistagedecisionmaking John prepared a business plan of a newproduct. In case of high demand for the product he makes 100. In case of lowerdemand he wouldlose -40. Probability of high demandis 0,45. He canpay 10 to conduct pilot survey of demand. Favorablesurvey and of unfavorablesurveyresulysareequallylikely to occur. Givenfavorablesurveyprobability of high demandis 0,8. Givenunfavorablesurveyprobability of lowdemandis 0,9. Whatshould John decide? Does the bestdecisiondepend on surveyresult?

  9. 0 0 23 100 23 -40 -10 26 -10 62 90 62 26 -50 -10 -10 -10 90 -36 -50

  10. Conditionalprobabilities of High and Lowdemandundergivensurveyoutcome Probability and joint eventsprobability

  11. CalculateConditionalprobabilities of Fav and Unfavsurveyundergiveneachdemandoutcome Bayes theorem so

  12. CanYoucalculate missing probabilities in eachrowseperately?

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