Avalanche Corporation - Strategic Recommendation
Avalanche Corporation
Decision Analysis and Strategic Recommendation
Table of Contents Table of Contents 1 Overview 2 Question 1: Production Strategy 2 Question 2: Sensitivity Analysis 3 Question 3: Influence of Outside Vendor 5 Question 4: Alternative Risk Profiles 6 Question 5: Are Fantastic Forecasters Worth It? 7 Conclusions 7 Appendix 8 Figure A: Precision Tree (Question 1) 8 Figure B: Cost Calculation Table 9 Figure C: Profit Calculation Table 9 Figure D: Tornado Graph 10 Figure E: Tornado Graph Data 11 Figure F: Spider Graph 12 Figure G: Decision Tree (No Outsourcing Available) 13 Figure H: Sensitivity of Decision Tree (with Data) 14 Figure I: Strategy Region (with Data) 15 Figure J: Decision Tree (Outsource Cost = $77) 16 Figure K: Risk Profiles 17 Figure L: Summary of Statistics 18 Figure M: Cumulative Risk Profiles 19 Figure N: Baye's Rule Calculations 20 Figure O: Decision Tree (Financial Forecasters) 21 Figure P: Strategy Region High Demand 22 Figure Q: Strategy Region Low Demand 23 Figure R: Strategy Region Outsource Cost 24 Figure S: Strategy Region Clearance Price 25 Figure T: Strategy Region Probability of High Demand 26
Overview
There are a number of inherent risks associated with any potential decision that Avalanche Corporation has to make regarding the production of the Avalanche Racer. The most inherent of all of the risks is the cost resulting from the decision between production values, since Avalanche will need to make a decision on how many to produce before they actually know how many that they are going to need. Next, Avalanche is unsure about how well the Racer will do when put on the market. This risk will be taken with a concern for two entirely external factors of uncertainty: whether or not Jones is correct about the forecast for the amount of snow that is going to fall over the course of the season and the amount of units that potential buyers are going to want to
Decision Analysis and Strategic Recommendation
Table of Contents Table of Contents 1 Overview 2 Question 1: Production Strategy 2 Question 2: Sensitivity Analysis 3 Question 3: Influence of Outside Vendor 5 Question 4: Alternative Risk Profiles 6 Question 5: Are Fantastic Forecasters Worth It? 7 Conclusions 7 Appendix 8 Figure A: Precision Tree (Question 1) 8 Figure B: Cost Calculation Table 9 Figure C: Profit Calculation Table 9 Figure D: Tornado Graph 10 Figure E: Tornado Graph Data 11 Figure F: Spider Graph 12 Figure G: Decision Tree (No Outsourcing Available) 13 Figure H: Sensitivity of Decision Tree (with Data) 14 Figure I: Strategy Region (with Data) 15 Figure J: Decision Tree (Outsource Cost = $77) 16 Figure K: Risk Profiles 17 Figure L: Summary of Statistics 18 Figure M: Cumulative Risk Profiles 19 Figure N: Baye's Rule Calculations 20 Figure O: Decision Tree (Financial Forecasters) 21 Figure P: Strategy Region High Demand 22 Figure Q: Strategy Region Low Demand 23 Figure R: Strategy Region Outsource Cost 24 Figure S: Strategy Region Clearance Price 25 Figure T: Strategy Region Probability of High Demand 26
Overview
There are a number of inherent risks associated with any potential decision that Avalanche Corporation has to make regarding the production of the Avalanche Racer. The most inherent of all of the risks is the cost resulting from the decision between production values, since Avalanche will need to make a decision on how many to produce before they actually know how many that they are going to need. Next, Avalanche is unsure about how well the Racer will do when put on the market. This risk will be taken with a concern for two entirely external factors of uncertainty: whether or not Jones is correct about the forecast for the amount of snow that is going to fall over the course of the season and the amount of units that potential buyers are going to want to