A Decision of Uncertainty
September 17, 2012
Richard LA Valley
A Decision of Uncertainty
To reduce prices or increase Marketing budget in order to capture market share
Sony Incorporated wants to make some changes within the business that in hopes will capture the market share of the industry. The only way to do this is by changing the pricing policy and strategy for the company. The first approach would be to create a development stage that will allow the managers to start setting prices this will allow the company to avoid releasing products or services that has no ability of sustaining profitable prices in the market. By changing the company pricing policies and ...view middle of the document...
There are many factors that may contribute to the overall results which may be simple or complex (Fernando, 2011).
Accuracy is of importance therefore once the research was gathered the focus was to identify ways to interpret the data to make the best business decision for the company.
Interpretation of data (using the Monte Carlo simulation)
To interpret the data collected, the company chose to use the Monte Carlo simulation as the probability model because the technique allows the company to account for any visible risks in decision making. Monte Carlo simulation provides the managers or decision makers with a wide range of possible outcomes and the probabilities that will occur relating to the choice of action (Fernando, 2011). With the use of the Monte Carlo simulation the company will have a clear vision of possible consequences for the business decisions the company may make. The information is best described in terms of probability distributions relating to uncertain sales for the company and its competitors prices. The uncertain variables will have an influence over the company decisions and its outcomes. It is very important to understand the uncertainty risks that to the success of failure of making the right decision for the company. With the use of probability distributions and the Monte Carlo simulation the company can quantify issues that are important when making drastic business decisions (Wyman, 2012). Quantitative risks analysis is a factor here because the company is uncertain of the future therefore all risks must be identified including a visual of the effect of the risks relating to the outcomes.
The company may include many factors before making their decision such as market conditions, consideration of customers, competitors, and expectations of the company. The agenda of changing the price policy is attract market share the risks is that the competitors will fear the new changes and react or challenge the company matching the prices or even risk going even lower as a way to protect its market share. Sales are influenced by the company marketing budget, competitor response, and price.
Sales= a (marketing budget) –b (company price) = c (competitor’s price)
Economic techniques are used with the market data the uncertainties within this scenario is the competitors response and their price the question is will they lower their prices to cause an offset which will cause the company...