Reference no: EM132609700

Learning outcome 1: be able to demonstrate problem-solving skills in assessing, organising, summarising and interpreting relevant data for decision making purposes.

Learning outcome 2: be able to apply decision theory to business situations.

Learning outcome 3: be able to explain the use of simulation in complex decisions.

TASK

The following case study has been developed to provide you with a realistic business scenario from which you can develop the necessary decision making skills to meet the learning outcomes of this subject. The case study will form the basis for Assessment Item 2 and 3.

Question 1 - Strategic Management

You have been asked to prepare a business report for Brooke River on the strategic position Pork Bellies Pty Ltd should pursue. The business wants to continue to increase its market share in the pork industry. The business report will form the basis of Brooke River's presentation at the next board meeting and will also be provided to all members of the board. The board members are very familiar with the pork industry but have limited accounting knowledge.

Areas you need to address include:

a) Identifying Pork Bellies' competitive advantage
b) Identifying four threats and four opportunities available to Pork Bellies
c) Identify four strengths and four weaknesses for Pork Bellies
d) Evaluate Pork Bellies' objectives for their strategic plan.
e) Using Porters generic strategies, what strategy would you recommend for Pork Bellies?

Question 2 - Decision Analysis

The board of directors (BOD) is considering whether or not to construct a processing plant in Darwin, Northern Territory. Pork Bellies will have an arrangement with the council to use the port for 5 years at a rate of 50% on normal cost and after that the cost will increase 175%. If demand is favourable, Pork Bellies will realise a net profit of $2,000,000 after the 5 years. If the market is not favourable, then they could lose $800,000. At this stage there is no reliable data on how successful the project could be. The board of directors are working on a 50-50 chance that the processing plant will be successful.
1. Construct a decision tree to analyse the problem. What should the BOD do, justify your answer?
2. The BOD are not confident with a 50-50 approach and have decided to employ a research firm who specialise in Bayesian Theorem to conduct a study on the viability of constructing a processing plant. The study will cost $10,000 and will work on the following statements of probability:
Probability of a favourable market given a favourable study = 0.72
Probability of an unfavourable market given a favourable study = 0.28
Probability of a favourable market given an unfavourable study = 0.21
Probability of unfavourable market given an unfavourable study = 0.79
Probability of a favourable research study = 0.55
Probability of an unfavourable research study = 0.45

a. Develop a decision tree to reflect the new alternatives.
b. Using the EMV approach, recommend a strategy that BOD should take. In your response discuss the alternatives.
c. Using the expected value of sample information, how much would the BOD be prepared to pay for the study?
d. What other information would the BOD want to help in making their decision?

Question 3 - Simulation

Pork Bellies is concerned that not enough space has been allocated for ships to dock and load quickly. You have been asked to create a simulation based on the following information:

The port works 7 days a week and 24 hours a day.

Required:

1. Using a table of random numbers simulate 2 weeks where only 1 ship can dock and load at a time.

2. Based on your results, should Pork Bellies try to acquire a second dock to unload? Justify your answer by discussing the results of the simulation, taking into consideration other factors that will impact the decision.

Attachment:- Assignemnt_file.rar