La Comida Foods would like to introduce a new line of tropical sauces and marinades. To introduce the new product line, La Comida can either introduce the products first in selected geographic areas to gauge consumer response OR go full-blast and launch the new product line nationally.  The cost of introducing the products in selected geographic areas for gauging consumer response is $150K. If the company decides to introduce the product this way, it would need to see the responses to the products before they decide to launch the product line nationally. The probability of a favorable response in the selected geographical areas is estimated at 0.60.  La Comida can also decide not to go for the launching in the product in selected geographical areas and go ahead with the nationwide launch or not.  If La Comida Foods decides to go full-blast in launching the products nationally and are a success, the company estimates that they will gain an annual income of $1.6 million. If the products are not a hit, the company will realize losses to the tune of $700K. La Comida estimates the probability of success for the sauces and marinades to be 0.50, if these are introduced without gauging consumer response. If the company decides to introduce in selected geographical areas to gauge consumer response, and the response is favorable, then the probability of a successful nationwide introduction increases to 0.80. If the consumer response during the introduction in the selected geographical areas is unfavorable, then the probability of national success drops to 0.30. What you need to do: 1) Using a decision tree analysis, help La Comida decide if they should introduce their new products through a selected geographical area. You have to show your complete decision tree in your submission. 2) Recommend the best strategy or course of action that La Comida should take for introducing their new line of marinades and sauce. Explain why.

Question

La Comida Foods would like to introduce a new line of tropical sauces and marinades. To introduce the new product line, La Comida can either introduce the products first in selected geographic areas to gauge consumer response OR go full-blast and launch the new product line nationally. 

The cost of introducing the products in selected geographic areas for gauging consumer response is $150K. If the company decides to introduce the product this way, it would need to see the responses to the products before they decide to launch the product line nationally. The probability of a favorable response in the selected geographical areas is estimated at 0.60. 

La Comida can also decide not to go for the launching in the product in selected geographical areas and go ahead with the nationwide launch or not.  If La Comida Foods decides to go full-blast in launching the products nationally and are a success, the company estimates that they will gain an annual income of $1.6 million. If the products are not a hit, the company will realize losses to the tune of $700K. La Comida estimates the probability of success for the sauces and marinades to be 0.50, if these are introduced without gauging consumer response.

If the company decides to introduce in selected geographical areas to gauge consumer response, and the response is favorable, then the probability of a successful nationwide introduction increases to 0.80. If the consumer response during the introduction in the selected geographical areas is unfavorable, then the probability of national success drops to 0.30.

What you need to do:

1) Using a decision tree analysis, help La Comida decide if they should introduce their new products through a selected geographical area. You have to show your complete decision tree in your submission.

2) Recommend the best strategy or course of action that La Comida should take for introducing their new line of marinades and sauce. Explain why.

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