- Some years ago, McDonald’s (MD) launched Campaign 55, reducing the prices of its “flagship” sandwiches with the objective of regaining market share. Before the launch, suppose MD’s management envisioned two possible out- comes: a strong customer response or a weak response. Industry experts were not very optimistic about the campaign. They assessed the probability of a strong response to be .4. MD predicted an expected profit of $50 million if the re- sponse proved to be strong. If the immediate customer response was weak, management believed that all was not lost. If MD could persuade the majority of its franchisees to back and help fund the campaign, the resulting profit would be $20 million. However, if the majority rose up against the campaign, the red ink would fly, and McDonald’s profit would be ?$100 million. MD considered these two outcomes to be equally likely.
- a. Giventheseassessments,constructadecisiontreetodetermineMD’sexpected-profit-maximizingcourseofaction. b. Suppose that MD has the flexibility to try the campaign but to terminate it if the initial response is weak, thereby
- limiting its total loss to $20 million. (It must pull the plug before knowing whether the franchisees are for or against the campaign.) Again, construct a decision tree to determine MD’s expected-profit-maximizing strategy.
EssayNICE | 24/7 Homework Help
Essaynice Will Help You Write Your Essays and Term Papers
Answered » You can buy a ready-made answer or pick a professional tutor to order an original one.
Assignment help 8237
HOME TO CERTIFIED WRITERS
Why Place An Order With Us?
- Certified Editors
- 24/7 Customer Support
- Profesional Research
- Easy to Use System Interface
- Student Friendly Pricing