2. Formulate one or more problem statements. 3. What are the decisions, outcomes, and relationships in the problem? 4. Draw an influence chart for the problem. 5. In what ways could we simplify the problem? 6. What modules will we need to build? 7. What are the key relationships in the problem? Draw their graphs. 8. What are the parameters of the problem?
It is early in 2000, and a friend of yours has invented a new manufacturing process for producing racquetballs. The resulting high-quality ball has more bounce, but slightly less durability, than the currently popular high-quality_ball which is manufactured by Woodrow Ltd. The better the players, the more they tend to prefer a lively ball. The primary advantage of the new ball is that it can be manufactured much more inexpensively than the existing ball. Current estimates are that full variable costs for the new ball are $0.52 per ball as compared to $0.95 for the existing ball. (Variable costs include all costs of production marketing, and distribution that vary with output. It excludes the cost of plant and equipment overhead etc.) Because the new process is unlike well-known production processes, the only reasonable alternative is to build a manufacturing plant specifically for producing these balls. Your friend has calculated that this would require $46 million of initial capital. He figures that if he can make a good case to the bank, he can borrow the capital at about a 10 percent interest rate and start producing racquetballs in a year. Your friend has offered to make you a partner in the business and has asked you in return to perform a market analysis for him. He has already hired a well-known market research firm, Market Analysis, Ltd. to do some data gathering and preliminary market analysis. The key elements of their final report are given below. Your problem is to determine how the new balls should be priced what the resultant market shares will be and whether the manufacturing plant is a good investment. Your friend is especially concerned about the risks involved and would like some measures of how solid the investment appears to be. He would like you to make a formal presentation of your analysis. It is early in 2000, and a friend of yours has invented a new manufacturing process for producing racquetballs. The resulting high-quality ball has more bounce, but slightly less durability, than the currently popular high-quality_ball which is manufactured by Woodrow Ltd. The better the players, the more they tend to prefer a lively ball. The primary advantage of the new ball is that it can be manufactured much more inexpensively than the existing ball. Current estimates are that full variable costs for the new ball are $0.52 per ball as compared to $0.95 for the existing ball. (Variable costs include all costs of production marketing, and distribution that vary with output. It excludes the cost of plant and equipment overhead etc.) Because the new process is unlike well-known production processes, the only reasonable alternative is to build a manufacturing plant specifically for producing these balls. Your friend has calculated that this would require $46 million of initial capital. He figures that if he can make a good case to the bank, he can borrow the capital at about a 10 percent interest rate and start producing racquetballs in a year. Your friend has offered to make you a partner in the business and has asked you in return to perform a market analysis for him. He has already hired a well-known market research firm, Market Analysis, Ltd. to do some data gathering and preliminary market analysis. The key elements of their final report are given below. Your problem is to determine how the new balls should be priced what the resultant market shares will be and whether the manufacturing plant is a good investment. Your friend is especially concerned about the risks involved and would like some measures of how solid the investment appears to be. He would like you to make a formal presentation of your analysis
