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The Ontario Brewing Company

The Ontario Brewing Company. Subsidiary of Dominion Brewing Company Limited Supply beer product Hope to strength its position in the younger, special-occasion segment of the lager market Develop a new beer different from the present line Promote the existing lines Risks:

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The Ontario Brewing Company

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  1. The Ontario Brewing Company • Subsidiary of Dominion Brewing Company Limited • Supply beer product • Hope to strength its position in the younger, special-occasion segment of the lager market • Develop a new beer different from the present line • Promote the existing lines • Risks: • Apply for high alcohol • Apply for new design bottle • Effects of competitive reaction and cannibalization

  2. -$1,600,000 $5,750,000 -$252,000 -$755,000 0.7, Big 1 Effect 0.6, Pass 0.3, Small -$800,000 4 New bottle -$1,600,000 0.5, Pass 0.4, Reject 0.5, Big 2 Effect 5 High alcohol $5,120,000 -$234,000 -$800,000 0.5, Small 0.5, Reject -$1,600,000 3 $4,200,000 0.6, Small -$800,000 $1,900,000-$888,000=$1,012,000 Decision tree

  3. Conclusion • Node 1: EMV1 = $5,750,000-$262,000-$755,000-0.7*$1,600,000-0.3*$800,000=$3,373,000 • Node 2: EMV2=$5,120,000-$234,000-0.5*$1,600,000-0.5*$800,000=$4,286,000 • Node 3: EMV3=$4,200,000-0.4*$1,600,000-0.6*$800,000=$3,080,000 • Node 5: EMV = 0.5*(0.6*EMV1+0.4*EMV2) +0.5*EMV3 =0.5*$3,738,200+$1,540,000 =$3,409,100 • EMV of new product > promoting the existing product

  4. Man Machine Systems, Ltd • Provide computer services • Hire technical representatives • Require skills • Unsuitable for 25% of the hired application • Consulting firm, Screening, Inc, provides the services to discriminate between suitable and unsuitable • Correct for 90% of the time • Cost $300 for one screening • Evaluate the value of the information

  5. Suitable 90% 25% 10% Unsuitable Accept Suitable 90% 75% 10% Don’t accept Unsuitable Decision tree • Reverse the decision tree using Bayes rules • Calculate the value of imperfect information • Determine whether the value of information > the cost of information ($300)

  6. Golden Horseshoe Cable TV • Peter Fitzgerald, VP of Finance for GHC TV • Instruct the consultants to develop model to • Predict subsidiary operating costs • Forecast corporate costs for the next 5 years • Provide information to evaluate the possible acquisition of new cable companies • Ten subsidiaries: different place • Four dept. in each subsidiary: Tech, Mktg, Prog, Admin.

  7. Golden Horseshoe Cable TV --cont’d • Three factors to account for operating costs • Average living units on service (LUS) • Miles of cable installed (CABLE) • Net gain subscribers (NGS) • Another factor: Total households passed by cable (POTENTIAL) • Data from 1972 to 1976 • One week to finish

  8. Analysis • Predict the costs • Statistical method • Build a model using history data • Time series to handle data relate to date • Four factors should distribute to predict for each subsidiary • The sum of all subsidiaries for corporate costs • To evaluate the possibility of new cable companies, the current data couldn’t provide the enough information. The consultant company would do much work to collect data to analysis.

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