Perform an analysis of the problem facing Allied Insurance and prepare a report that summarizes your findings and recommendations. Be sure to address the following issues:
- The payoff table of Russo Manufacturing, ignoring all the probabilities.
- Recommendations regarding which decision the management should take if they ignore
the probabilities and decide to apply the following decision criteria:
- Optimistic Approach
- Conservative Approach
- Minimax Regret Approach
- Computation of the posterior probabilities of weak demand, medium demand and strong demand given the market research is conducted. Briefly explain the meaning of
- A decision tree illustrating the decisions and events that Russo is facing. All the payoffs,
probabilities and decision at each step need to be labelled carefully on the tree.
- A recommendation whether the market research should be undertaken. Explain clearly the reasons for your recommendation.
- A decision strategy that Russo should follow if they take the recommended action in 5. (10 marks)
- A sensitivity analysis to illustrate how different decisions change if the prior probability
of [xiii.] change by 0.1 at a time.
Presentation (10 marks)
The report must be written in a clear manner and including the required items. There is no need to restate the questions in your report. Your report must have the following structure:
- Executive summary
Give an overview of the problem, the solutions and the recommendation
Introduce the case study and the objectives of the report
- Main body
This section addresses all the questions associated with the case study.
Conclude the case study and present your recommendations to the board of directors based on the analysis.