Red Fish Blue Fish is an outdoor waterfront eatery in Victoria’s Inner Harbour that serves a variety
of daily seafood dishes. Each day, Barry Schmelly, the owner of Red Fish Blue Fish must decide how
many salmon to purchase from the local fisherman. Salmon costs him $4.45 per pound and is sold at
an average price of $16.95 per pound (across the many salmon dishes he serves each day). To
maintain his reputation for fresh seafood dishes, any leftover salmon is sold to a local cannery for
$2.50 per pound. Barry is also aware that any unmet customer demand for fresh salmon will cost
him as patrons will go to another eatery on the Harbour to eat fresh salmon and may potentially
impact future sales. He quantifies lost sales and damaged customer goodwill to be $5.00 per pound
whenever demand for salmon exceeds his supply. Historically, his daily demand for salmon is:
(in pounds) 20 25 30 35 40 45 50 55 60 65 70 75
Probability 0.02 0.05 0.06 0.10 0.12 0.13 0.17 0.13 0.09 0.06 0.04 0.03
Help Barry determine how many pounds of salmon to order each day by answering the questions
below. Assuming the demand and costing information above is accurate, answer the following
questions by developing a spreadsheet model using Excel (do not use paper and pencil):
a. Construct the payoff table. You do not have to create complex formulas to do this! You
should realize that using simple calculations (+, ‐ , *, etc) will easily suffice for
creating the payoff table. Copy and paste your payoff table from Excel into your Word
document as a “picture” for proper formatting as per the guidelines on page 4.
b. What decision should be made according to the maximax decision rule?
c. What decision should be made according to the maximin decision rule?
d. What decision should be made according to the EMV decision rule?
e. What decision should be made according to the minimax regret decision rule?
f. What decision should be made according to the EOL decision rule?
g. How much should Barry be willing to pay to obtain a demand forecast that is 100% accurate?
h. Which decision rule would you recommend for Barry to use? Provide a clear explanation
why you are recommending a particular decision rule.
The management team of a BC Company called “Tilray Canada Inc” is considering the purchase of a
marijuana production facility that is currently up for sale in Calgary Alberta. The production of
marijuana in Canada is poised to become a multi-billion dollar business over the next several years
as the product is legalized for sale for medicinal and recreational purposes1. There is however still
uncertainty with respect to future market demand of recreatonal users that will likely result in some
“winners” and some “losers” in this growing industry. The debate over actual market demand of
recreational users is currently uncertain but the management team believes there is an 80% chance
that market demand of recreational users will be strong.
The sale of the production facility is to be determined at a sealed bid auction next week. The Analytics
Manager at Tilray estimates that if he bids $900,000, there is a 25% chance that he will obtain the
facility; if he bids $1.35 million, there is a 45% chance that he will obtain the facility; and if he bids
$1.75 million, there is an 85% chance that he will obtain the facility. If they acquire the production
facility and there is strong market demand of recreational users, they estimate a $2.2 million in profit
during the first year of operation. However, if there is weaker market demand, they expect to make
only $250,000 in profit during the first year of operation.
Please complete the following to help the management team of Tilray with their decision making
a) Using Treeplan.xla, create a decision tree for this problem using a 1 year time boundary.
Provide a clear statement of the optimal decision strategy according to the EMV decision
3 of 4
b) State the risk profile of the optimal decision strategy in part a).
c) Create a sensitivity table using Data Tables in Excel to show how the optimal decision may
change if the probability of the market demand of recreational users varies from 0% to 100%
in steps of 10%. Be sure to provide a statement saying what the sensitivity table means in
the context of the decision problem.
d) Develop a second sensitivity table showing how the overall optimal decision may change if
the profits associated with a strong market demand varies from $2 to $3 million dollars in
steps of $100,000. Again, state what the sensitivity table means.
A group of surgeons are considering opening a surgical center in downtown Vancouver, offering foot,
ankle, knee and hip surgery to the general public. The surgeons believe that their success of opening
such a facility is largely dependent on an upcoming legal decision2 (to be decided in June 2021) to
grant or not grant further public access to private health care facilities. If the BC Supreme Court
supports future public access to private health care facilities, the surgeons believe that a clinic would
have a “excellent” or “good” market opportunity. Likewise, if the court decides to restricts future
access, the surgeons believe this would create “poor market” conditions respectively. Currently, the
surgeons estimate the 3 market conditions as a function of the court’s decision is as follows:
P(“Excellent Market”) = 0.30; P(“Good Market”) = .30 and P(“Poor Market”) = 0.40. The surgeons
estimate that each patient treated will provide a unit profit margin (averaged across their various
services) of $1300 (not including the intial startup costs associated with opening the clinic) and the
number of patients treated under the 3 market conditions in their first year of operation is 800, 500
and 70 respectively. The surgeons’ initial start up costs is estimated at $350,000 for opening the
clinic. Of course, they do not need to proceed at all, in which case there is no cost.
a) Draw a decision tree by hand (using paper and pencil) and solve it using the EMV decision
criterion to help analyze their problem considering their first year of potential operation.
According to the EMV decision criterion, what the eye surgeons do? Provide a clear
statement. Take a picture of your hand‐drawn decision tree using your phone (or other
device) and incorporate it into your Word document for submission.
b) Develop a risk profile for the eye surgeons for the decision associated with opening the clinic.
The surgeons have been approached by Legal Inc., a research firm that specializes in legal decisions
associated with healthcare policies, that offers to analyze the case and provide expertise on the likely
outcome of the market condition for the new center for a fee of $10,000. The research firm claims
their analysis is accurate “most of the time” and provides you with the following information of its
past performance of outcomes associated with similar legal decisions and their research findings:
Actual Market Outcomes
Research Predicted Postive Markets 0.913 0.39 0.15
Research Predicted Negative Markets 0.09 0.61 0.85
a) Develop a second decision tree for the eye surgeons to reflect the option of hiring the research
firm. Draw this decision tree by hand and evaluate it using the EMV decision criterion. Use the
same cash flows provided in Part I. Hand in your hand drawn solution with a concluding
statement with respect to the surgeons’ optimal decisions.
b) Use Treeplan to replicate your hand-drawn decision tree in Part II a). Copy and paste your
decision tree into your Word document as a picture per the guidelines on page 5.
c) State the Risk Profile associated with the optimal decision strategy (alternative) under the
context of the EMV decision criterion for Part II.
Depict the association, the center exercises and any extra administrations it gives. Hublot is a Swiss extravagance watch maker established in 1980 by Italian Carlo Crocco. Hublot, the French word for 'opening' depicted the plan of the brand's first watch. This was the main watch with a characteristic elastic tie, which had required 3 years of exploration. The mix of a gold watch case with an elastic tie was dubious at that point. Hublot is an extremely youthful brand for a Swiss extravagance watch maker. Moreover, the brand was little until it went under new initiative in 2005. Jean-Claude Biver, already the leader of Omega, driven the turn of events and arrival of another model called the Big Bang. Hublot extended quickly from that point going from a turnover of $25 million out of 2004 to $200 million out of 2008. This implies Hublot is feeling the loss of the selling purpose of legacy, however the brand's utilization of vanguard materials and plans pulls in clients notwithstanding. Hublot was procured by LVMH (Louis Vuitton Moet Hennessey), a French global extravagance merchandise combination, in 2008 for around $500 million (Lelarge and Biver, 2015). Hublot additionally offers overhauling for their watches which is regularly vital for mechanical watches like clockwork or thereabouts. 3.2. Why? What does the market resemble? Direction: Who is their objective client, what ascribes characterizes this gathering? Could the market be fragmented, what helpful bits of knowledge come from this? How would they analyze against the opposition or options? How huge is the market, what are the ways of managing money of clients and so forth… Industry Description and Outlook/Target Market/Competitive Analysis/Projections/Regulations Watches are the third biggest fare from Switzerland after synthetics and hardware. The Swiss watch industry sold $20 billion of watches in 2018. Notwithstanding just representing 6.6% of these deals by volume, extravagance looks after ($3000) represented 66.1% of deals by esteem. With the rising working class around the planet, particularly in Asia, Swiss watch trades are relied upon to keep on developing unassumingly (Federation of the Swiss Watch Industry FH, 2019). Figure 2 – 2018 deals of Swiss watches in primary business sectors with development from earlier year (Federation of the Swiss Watch Industry FH, 2019) Figure 3 – Portion of Swiss watch deals in 2018 by locale (Federation of the Swiss Watch Industry FH, 2019) The cliché extravagance Swiss watch purchaser is a more than 40 year old finance manager. Without a doubt, a recent report found that in the UK, the normal Rolex proprietor is a 68 year old male, living in South-East England and London, working in an administrative job (HomeProtect, 2017). As per a YouGov survey, 31.2% of long term olds don't possess a watch contrasted with 10.5% of 55+ year olds. Of the individuals who do claim watches, youngsters are less inclined to wear a watch consistently: 25.8% for 16-34 contrasted with 49.5% for 55+ (Floyd, 2011). This affirms the more established period of target clients for Swiss extravagance watch. Be that as it may, Hublot focuses on an alternate client section. Commonplace Hublot clients are 25-40 year old rappers, proficient competitors, for example, footballers, and start-up CEOs as indicated by the past CEO Jean-Claude Biver. They are essentially rich to bear the cost of the lofty extravagance valuing. In particular, they are conspicuous people who need a pompous plan. As a feature of this, selectiveness and uniqueness are exceptionally esteemed qualities in the items they purchase. These clients will purchase extravagance products consistently (instead of clients who may just get one costly watch for an exceptionally extraordinary event). This client fragment can be measured by taking a gander at the quantity of moguls under 35 around the planet: around 128,000 (Verdict, 2017). Figure 4 – Number of tycoons under 35 for each city (Verdict, 2017) While 30% of extravagance Swiss watches were sold in Greater China in 2015, this number is just 10% for Hublot (Lelarge and Biver, 2015), coordinating the level of millennial tycoons living in Greater China (Figure 4). There is significant confidence in the extravagance watch market for proceeded with development popular in China. Notwithstanding, the Chinese market as of now favor more customary brands and plans, for example, Rolex, Longines and Omega. Hence, Hublot doesn't straightforwardly target China however is hanging tight for Chinese tastes to "westernize". Hublot have some immediate rivalry through Audemars Piguet and Richard Mille. Be that as it may, both order greater costs while abstractly missing the extraordinary allure of Hublot, focusing on the horology/internals all things being equal. The biggest contender for Hublot's objective client portion is likely Rolex because of their generous image acknowledgment regardless of Rolex's distinctive offer with more controlled and less restrictive plans. There is some opposition through other extravagance Swiss watchmakers, however they are either very specialty or target diverse client portions. Hublot's objective client fragment being youthful would show smartwatches are an expected contender to Hublot. Undoubtedly, Hublot delivered an extravagance smartwatch in 2018. In any case, Hublot and the more extensive Swiss watch industry don't really see smartwatches as a danger yet rather a chance. They trust smartwatches will get youngsters wearing wristwatches once more (Lelarge and Biver, 2015). 60% of watch shoppers utilize on the web and advanced channels to explore costs or discover item data (Deloitte, 2017). Outline demonstrating rivalry correlation 9.3. How? What is the plan of action? Direction: How would they bring in cash? Significant expenses, deals draws near, connections and so on… The 'Plan of action Canvas' is an exceptionally accommodating aide (google the term and loads of extraordinary exhortation on it will come up). Not every last bit of it is pertinent to each association however it's an extraordinary spot to begin in case you're trapped. c.a. Offer Hublot's incentive incorporate their selectiveness and vanguard, one of a kind, and conspicuous plan. The costly and outlandish materials likewise carry an incentive to Hublot clients. Also, clients notice they believe they are joining a local area when purchasing a Hublot watch (Ap, 2018). This is because of the selectiveness of Hublot observes yet in addition the chance of joining an online local area called Hublotista. On this site, clients are welcome to restrictive occasions (regularly with Hublot supported famous people joining in), welcome to support their watches following a couple of years, given early declarations about new restricted deliveries, and simple contact with Hublot agents. d.b. Deals Channels Hublot sell their watches through two channels: straightforwardly to the client through their shops or in a roundabout way through outsider retailers who purchase stock from Hublot. Hublot is exceptionally particular in their selection of retailers and cutoff their stockpile to guarantee the restrictiveness of the item. Hublot doesn't sell straightforwardly online anyway some outsider retailers do. Hublot have begun another business procedure they call the "Computerized Boutique" where clients can book an arrangement for a Skype or FaceTime call with a business partner who can introduce observes carefully and work with the client on finding the correct watch for them. This brings the individual help that extravagance customers expect, while keeping the accommodation of web based shopping. e.c. Deals and Marketing Costs A sizable extent of the business income goes straightforwardly to the retailer and a commission to the sales rep. These qualities are mysterious and change fundamentally between organizations. As indicated by the solidified pay articulation for LVMH, cost of deals (or creation cost) represents 33.4% of income, while showcasing and selling costs represents 37.9% (LVMH, 2019). This shows the significance of brand picture for most extravagance organizations. Hublot doesn't have the brand acknowledgment of other extravagance brands. Hublot is just the fourteenth most perceived Swiss watch brand (Interbrand, 2016) thus puts vigorously in sponsorships to cure this. Hublot, realizing their client portion, put resources into football before other extravagance brands. 10.4. Procedure? What is their methodology? Direction: What controls their dynamic cycle? How has this changed after some time? Who/what controls the methodology? What is the reason behind the activities? Is there a priority? What are the basic variables or assets that may be vital to their methodology? And so on… Problem/Policy/Actions Despite the fact that LVMH claims Hublot, the brand has relative autonomy in its dynamic as per the then CEO of Hublot. This is likely because of the brands proceeded with progress. There are three significant perspectives to Hublot's methodology. a. "The Art of Fusion" The expression "specialty of combination" is rehashed continually in meetings and official statements. The term freely implies the combination of future and custom frequently through materials. Hublot puts intensely in the advancement of new materials for use in its watches which it at that point blends in with "customary" materials, for example, gold with a "conventional" mechanical development. The brands creation is vertically coordinated to take into account quicker advancement and key autonomy. The brand activities unmistakably exhibit the brands materials and creation venture system: Hublot constructed their own foundry in 2012, does electro-plating in-house, have had the ability of machining sapphire precious stone since 2016 and procured the Swiss firm Profusion, worked in the assembling of carbon fiber parts, in 2011 (Hublot, 2018). What is the objective? What issue would they say they are tending to? Extraordinary materials, making cool elite watches, advancement, push limits. c.b. "Organizations" Hublot puts essentially in "associations" or rather sponsorships of superstars or wearing groups. For instance, Hublot sponsorship is vigorously present in football, as of now supporting the FIFA world cup, Pele, Kylian Mbappe, Juventus, Chelsea, Benfica, and Jose Mourinho. In 2008, Hublot supported Manchester United for a very long time for £4>GET ANSWER