TechTrend, a leading electronics firm, is considering launching a new smartwatch model to rival its competitors. The marketing team has conducted a preliminary analysis, gathering data about potential sales, marketing strategies, and costs. Your task is to assist in the decision-making process using the concepts learned in Week 2.
| Strategy | Marketing Cost | Expected Sales (Units) | Expected Price per Unit ($) | Competitor-response Probability | Potential Market Share Loss due to Competitor |
|---|---|---|---|---|---|
| A | 500,000 | 60,000 | 200 | 0.6 | 15 |
| B | 700,000 | 80,000 | 220 | 0.7 | 20 |
| C | 900,000 | 210 | 210 | 0.8 | 25 |
Questions:
- For each strategy, calculate the potential revenue without considering competitor response. Which strategy offers the highest potential revenue?
- Using the concept of expected value, estimate the revenue for each strategy considering the potential loss of market share due to competitor response.
- Construct a decision tree for Strategy A detailing the potential outcomes with and without competitor response. What is the expected value of Strategy A considering both scenarios?
- Which strategy carries the highest risk, given the combination of marketing costs and competitor response probability?
- Using sensitivity analysis, determine how much the Expected Sales would have to increase for Strategy C to be the most favorable option in terms of expected value.
- If TechTrend is risk-averse, which strategy would you recommend they consider? Justify your answer.
- Given a fixed budget of $800,000 for marketing, which strategies can TechTrend afford?
- Calculate the return on investment (ROI) for each strategy without considering competitor response. Which strategy offers the best ROI?
- Suppose TechTrend has prior data that suggests a 10% increase in market share loss for every 5% increase in competitor response probability. Recalculate the expected values based on this new information. Does the optimal strategy change?
- If a new market survey suggested that Strategy B's price per unit could be increased to $240 without affecting sales volume, how would this change your recommendation? Calculate the new expected revenue for Strategy B.
Submission Instructions:
- A 3–5-page Word Document including title page anda references page
- Must include a title page, abstract, and references. These are not counted in the page count/slide count.
- Must include your original Excel Sheet.