Susan has been thinking about starting new own petrol station. Susan's problem is to decide how large her station should be. The annual returns will depend on both the size of her station and a number of marketing factors related to the oil industry and demand for petrol. After a careful analysis, Susan developed the following decision table: GOOD FAIR POOR SLE OF MARKET MARKET (50 MARKET (5) STATION 10:25 10:49 10.30) 50,000 20,000 10,000 Medium 80,000 30,000 -20,000 Large 100,000 30,000 40.000 Very large 300,000 25,000 -160,000 . What is the best size of the petrol station using Optimistic approach? b. What is the best size of the petrol station using Conservative approach? What is the best size of the petrol station using Minimising Regret approach? [1+1+3 = 5 marks] Answer to Question 1: Part A [1+1+3 = 5 marks] Question 1: Part B Jim Sellers is thinking about producing a new type of electric razor for men. If the market were successful, he would get a return of $100,000, but if the market for this new type of razor were unsuccessful, he would lose $60,000. If the razor is not produced, Jim Sellers will neither gain profit nor suffer loss. Since Ron Bush is a good friend of Jim Sellers, Jim is considering the possibility of using Bush Marketing Research to gather additional information about the market for razor. Ron has suggested that Jim use either a survey or a pilot study to test the market. The survey would be a sophisticated questionnaire administered to a test market. It will cost $5,000. Another alternative is to run a pilot study to test the market. This would involve producing a limited number of the new razors and trying to sell them in two cities that are typical of American cities. It will cost $20,000. Ron Bush has suggested that it would be a good idea for Jim to conduct either the survey or the pilot before Jim makes the decision concerning whether to produce the new razor. But Jim is not sure if the value of the survey or the pilot is worth the cost. Jim could also decide to neither use survey nor pilot study to test the market concerning the new razor. Jim estimates that the probability of a successful market without performing a survey or pilot study is 50%. If the cur i e conducted then the probability of successful ww1122122222W6CVI Jim estimates that the probability of a successful market without performing a survey or pilot study is 50%. If the survey is conducted, then the probability of a successful market given a favourable survey result is 78% while the probability of a successful market given an unfavourable survey result is instead 27%. However, if the pilot study is conducted, then the probability of a successful market given a favourable study result is 89% while the probability of a successful market given an unfavourable study result is instead 18% a. Draw the decision for the above decision making scenario. b. Should Jim Sellers test the market prior to launching the new razor? c. Should Jim Sellers launch the electric razor? [6+3+1=10 marks) Susan has been thinking about starting new own petrol station. Susan's problem is to decide how large her station should be. The annual returns will depend on both the size of her station and a number of marketing factors related to the oil industry and demand for petrol. After a careful analysis, Susan developed the following decision table: GOOD FAIR POOR SLE OF MARKET MARKET (50 MARKET (5) STATION 10:25 10:49 10.30) 50,000 20,000 10,000 Medium 80,000 30,000 -20,000 Large 100,000 30,000 40.000 Very large 300,000 25,000 -160,000 . What is the best size of the petrol station using Optimistic approach? b. What is the best size of the petrol station using Conservative approach? What is the best size of the petrol station using Minimising Regret approach? [1+1+3 = 5 marks] Answer to Question 1: Part A [1+1+3 = 5 marks] Question 1: Part B Jim Sellers is thinking about producing a new type of electric razor for men. If the market were successful, he would get a return of $100,000, but if the market for this new type of razor were unsuccessful, he would lose $60,000. If the razor is not produced, Jim Sellers will neither gain profit nor suffer loss. Since Ron Bush is a good friend of Jim Sellers, Jim is considering the possibility of using Bush Marketing Research to gather additional information about the market for razor. Ron has suggested that Jim use either a survey or a pilot study to test the market. The survey would be a sophisticated questionnaire administered to a test market. It will cost $5,000. Another alternative is to run a pilot study to test the market. This would involve producing a limited number of the new razors and trying to sell them in two cities that are typical of American cities. It will cost $20,000. Ron Bush has suggested that it would be a good idea for Jim to conduct either the survey or the pilot before Jim makes the decision concerning whether to produce the new razor. But Jim is not sure if the value of the survey or the pilot is worth the cost. Jim could also decide to neither use survey nor pilot study to test the market concerning the new razor. Jim estimates that the probability of a successful market without performing a survey or pilot study is 50%. If the cur i e conducted then the probability of successful ww1122122222W6CVI Jim estimates that the probability of a successful market without performing a survey or pilot study is 50%. If the survey is conducted, then the probability of a successful market given a favourable survey result is 78% while the probability of a successful market given an unfavourable survey result is instead 27%. However, if the pilot study is conducted, then the probability of a successful market given a favourable study result is 89% while the probability of a successful market given an unfavourable study result is instead 18% a. Draw the decision for the above decision making scenario. b. Should Jim Sellers test the market prior to launching the new razor? c. Should Jim Sellers launch the electric razor? [6+3+1=10 marks)