Decision Tree Case Study

1623 Words Nov 10th, 2014 7 Pages
Decision tree analysis
Decision tree analysis known as an analytical tool applied to decision-making under condition of uncertainty, also clarifying where there are many possible outcomes for various alternatives and some outcomes are dependent on previous outcomes. However, decision tree will present as a diagram by showing the relationship among possible courses of action, possible events and the potential outcomes for each course of action in the decision (Drury, 2012). So decision tree analysis is useful for merchant navy company to understand in what direction their chance events are and what their values in terms of profits and losses are for each of the two tooling alternatives, also visualize the outcomes of different prospects
…show more content…
The marketing management thinks that market shipping new service nationally successful that the expected profits (excluding the cost of the market study) will be ¥1,600,000 however if the market shipping new service nationally failure then it expected loss of ¥700,000(excluding the cost of the market study). However absence of market study, there are equal chances of national success and national failure after if China Shipping (Group) Company decide to market nationally. Therefore now the marketing management has to determine the best strategy that China Shipping (Group) Company should adopt.
Excel

According to the decision tree above, the optimal decision for China Shipping (Group) Company is to carry out test market and then market nationally if national success then the company will have return in expected profit of ¥654,000 compared to do not conduct test market only have expected profit of ¥450,000.
Sensitivity analysis

Assuming the probability of national success after the market study will decrease by 15% and the probability of national success without market study will increase by 10%. If a local success is observed, the new probability will decrease from 80% to 65% that new shipping service will be national success. If a local failure is observed, the new probability will decrease from 30% to 15% that new shipping service will be will be national success. However absence of market study and immediately market

More about Decision Tree Case Study

Open Document