Version 1: September 17th, 2014
Case Study for Blake Electronics
Blake Electronics was founded in 1979 by Steve Blake. Based in Long Beach, California, Blake Electronics manufactures various types of electronic components including resistors, capacitors, and inductors. Blake Electronics supplies components to companies that manufacture more complicated electronic equipment.
Total annual sales increased $8M between 1992 and 2002
More than 200 highly skilled employees by 2002
Began seeking government contracts for electronic components in 2000
By 2007 Blake Electronics had overextended itself and was unable to consistently fulfill all orders. As a result the…show more content… Given a successful venture, the odds of a favorable survey result from I&W are 90%. Conversely, given an unsuccessful venture, the odds of an unfavorable survey result are 80%.
1. Does Steve need additional information from Iverstine and Walker?
2. What would you recommend?
Blake Electronics can choose to either take the Master Control Center to market or abort the project. If they choose to move forward with the new product they have three options; hire MAI to perform market research, hire I&W to perform market research, or utilize the best estimates of the in house research team.
If Steve chooses to abandon the project the EMV is $0.
The expected value of utilizing his in house research team is $700,000. This value was derived from the following calculations:
Projected Increase in sales = $2,000,000
Manufacturing costs = $500,000
Total increase in sales = $2,000,000-$500,000 = $1,500,000
Probability of MCC success = .6
Probability of MCC failure = .4
EMV = .6($1,500,000) + .4(-$500,000) = $700,000
Data used to derive the EMV for MAI can be found in the table below Marketing Associates, Inc | | | | Outcome | Favorable Survey | Unfavorable Survey | Total | | Successful Venture | 35 | 20 | 55 | | Unsuccessful Venture | 15 | 30 | 45 | | Total | 50 | 50 | 100 | | | | | | | | | | | | State of Nature | Conditional