You’re the manager of global opportunities for a U.S. manufacturer, who is considering expanding sales into Asia. Your market research has identi-
fied the market potential in Malaysia, Philippines, and Singapore as described next:
Success Level Big Mediocre Failure
Malaysia Probability 0.3 0.2 0.5
Units 1,200,000 384,000 0
Philippines Probability 0.4 0.3 0.3
Units 1,400,000 700,000 0
Singapore Probability 0.1 0.7 0.2
Units 500,000 300,000 0
The product sells for $10 and has unit costs of $8. If you can enter only one market, and the cost of entering the market (regardless of which market you select) is $250,000, should you enter one of these markets? If so, which one? If you enter, what is your expected profit?

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Respuesta :

anthougo anthougo · Answer 1 · 2020-08-22T05:59:45+02:00

Answer:

a) Yes.

b) Philippines

c) Expected profit is $1,540,000

Explanation:

a) Data and Calculations:

Market potential in Malaysia, Philippines, and Singapore as described next:

Success Level Big Mediocre Failure Expected units

Malaysia Probability 0.3 0.2 0.5

Units 1,200,000 384,000 0

Expected units 360,000 76,800 0 436,800

Philippines Probability 0.4 0.3 0.3

Units 1,400,000 700,000 0

Expected units 560,000 210,000 0 770,000

Singapore Probability 0.1 0.7 0.2

Units 500,000 300,000 0

Expected units 50,000 210,000 0 260,000

b) Determination of outcomes:

Malaysia Philippines Singapore

Expected units 436,800 770,000 260,000

Contribution per unit $2 $2 $2

Contribution margin $873,600 $1,540,000 $520,000

Cost of market entrance 250,000 250,000 250,000

Net Income $623,600 $1,290,000 $270,000