MANAGEMENT DECISION MAKING FOR BUSINESS

University of Westminster, WBS Management Decision Making for Business	April 2022 5MNST006W.2
Decision Making for Marketing Managers	5MNST007W.2

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ASSESSMENT TWO
DECISION SIMULATION REPORT
SECOND SEMESTER – 2021/2022
MODULE CODE: 5MNST006W.2 & 5MNST007W.2
MODULE TITLE: MANAGEMENT DECISION MAKING FOR BUSINESS &
DECISION MAKING FOR MARKETING MANAGERS
DATE AVAILABLE: 6th April 2022
SUBMISSION DATE: 3rd May 2022
SUBMISSION METHOD: Name report with company name and
market, for example, ‘sneakers are us”, London. Submission is via a
Turnitin link on Blackboard.
Do NOT include your name or student number within the file name or
anywhere within your submission. The submission will be subject to
anonymous marking
DATE AND FORM OF FEEDBACK: By 24th May 2022 via Blackboard
ASSESSMENT FORMAT: report
ASSESSMENT WEIGHTING: 75%
WORD COUNT: up to 3,000 words (or equivalent)
LEARNING OUTCOMES ADDRESSED:
LO2 – Articulate the differences between individual and group decision making,
choice and problem-solving behaviour and their psychological dimensions.
LO3 – Evaluate information from a range of sources and apply business data
analysis techniques to provide a range of solutions to a management problem.
LO5 – Evaluate the short-term and long-term consequences of business
decisions for financial, environmental, and social performance
LO6 – Recognise the difficulties that imperfect information, risk, uncertainty, and
complexity impose upon decision-makers and determine how these difficulties
may best be mitigated, using appropriate risk management techniques.

University of Westminster, WBS Management Decision Making for Business	April 2022 5MNST006W.2
Decision Making for Marketing Managers	5MNST007W.2

AssignmentTutorOnline

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1. ASSESSMENT SUMMARY
In this assessment, you are asked to answer five questions using concepts
learned in the module. The first three questions are based on data from a case
study provided in this document. The fourth question is based on your own
experience of working in a team. The fifth question is a research question.
2. MARK DISTRIBUTION

Questions	Indicative number of words	Marks
Q1. Decision making under risk and uncertainty	500	20
Q2. Investment decisions	500	20
Q3. Constrained optimisation and Scenario analysis	400	15
Q4. Group decision making	400	15
Q5. Environmental and social impact	500	20
Ranking in the simulation game	n/a#	10
TOTAL	3000	100

# Participation in the game deemed equivalent to 700 words.
3. CASE STUDY: ECOSNEAK – ‘Sustainable sneakers for all’
Ecosneak is a sneaker merchandising company that prides itself on its
environmental credentials; it considers sustainability (alongside high quality) to
be central to its business model. The company started operating three years
ago in the Edinburgh market; from the start its strategy was to target the higher
end of the market – the ‘quality’ and ‘customer intimacy’ segments – in both the
men’s and women’s markets. Ecosneak was set up two sisters – Jenny and
Jess Wilson; Jenny is responsible for purchasing and inventory management,
while Jess looks after marketing; a year ago they recruited a former university
friend of theirs, John Moto, to focus on financial matters and he is now a key
part of the business, particularly as Stride has been facing more intense
competition over the last year or so. John has consequently been asked to
review the company’s financial position in 2021 and 2022 (presented in Tables
1, 2 & 3) prior to analysing the impact of a range of possible decisions on
revenues and profits.

University of Westminster, WBS Management Decision Making for Business	April 2022 5MNST006W.2
Decision Making for Marketing Managers	5MNST007W.2

T 3
able 1: Sales, Revenue and Cost Data for Ecosneak (2021 and 2022)

Years	2021	2022
Sales volume
Men*	29,832	25,500
Women*	29,000	30,000
Total revenues (Men)	€2,684,880	€2,550,000
Total revenues (Women)	€2,320,000	€2,100,000
Total revenues	€5,004,880	€4,650,000
Cost of sales (Men)	€1,193,280	€1,020,000
Cost of Sales (Women)	€1,102,000	€1,140,000
Distribution Cost	€294,160	€277,500
Total Cost of sales	€2,589,440	€2,437,500
Gross margin	€2,415,440	€2,212,500
Marketing and Sales	€400,000	€400,000
General administration cost	€1,400,000	€1,500,000
Net profit	€615,440	€312,500

*Total Sales Quality and Customer Intimacy Segments
Table 2: Selling Prices and Variable Costs

2021	2022
Men’s Sneakers	Women’s Sneakers	Men’s Sneakers	Women’s Sneakers
Price per pair	€90	€80	€100	€70
Purchase Cost	€40	€38	€40	€38
Distribution Cost	€5	€5	€5	€5

 

University of Westminster, WBS Management Decision Making for Business	April 2022 5MNST006W.2
Decision Making for Marketing Managers	5MNST007W.2

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Table 3: Ecosneak’s Share of Total Market (Quality + Customer Intimacy)

2021	2022
Men’s	23%	18%
Women’s	20%	19%

Q1: Decision Making under Risk and Uncertainty
Jess is getting increasingly concerned that Ecosneak may be losing its
competitive advantage. She has discovered that new competitors have been
entering the quality and customer intimacy segments and this has been putting
pressure on the company’s market shares in both men’s and women’s markets.
She tried an experiment in 2022 to examine the impact of price changes on
sales revenues; she increased the price of men’s sneakers by €10 per pair,
while cutting the price of women’s sneakers by the same amount. Purchase and
distribution costs were left unchanged. Unfortunately, this seems to have
caused a drop in net profits from the previous year but, undeterred, Jess wants
to examine three different pricing options for men’s sneakers in 2023 despite the
current economic uncertainty and the looming threat of recession.
Q2: Investment Options
Jenny has begun to wonder whether the company can fight off this competitive
threat or whether it is time to rethink its entire business strategy. One option that
John would like the others to consider is whether the company should expand
into the Kid’s market (targeting both quality and customer intimacy segments).
However, this option has so not far seemed particularly attractive to Jenny, who
feels that the company has little knowledge of the sorts of sneakers that kids
might like and that Ecosneak has insufficient resources to expand without
increasing borrowing.
In order to decide on the company’s strategy over the next six years, John
commissioned some background research a few months ago from a
consultancy company. On the basis of this he has attempted to define and
quantify the possible outcomes from the following two (mutually-exclusive)
options:
1. Focus on R&D to improve product quality
This is Jenny’s preferred option. It would require a €300,000 up-front initial
expenditure in 2023. John has estimated (based largely on past experience,
one would have to say) that this is expected capture increased market share

University of Westminster, WBS Management Decision Making for Business	April 2022 5MNST006W.2
Decision Making for Marketing Managers	5MNST007W.2

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in men’s and women’s market and will result in additional annual net profits
for Ecosneak over the six-year period (from 2024) as follows:

Year 1	€50,000
Year 2	€100,000
Year 3	€100,000
Year 4	€125,000
Year 5	€125,000
Year 6	€50,000

2. Expansion into the Kid’s market
This option is favoured by John, but appears more risky, because as far as
Ecosneak is concerned, the market is untested and there are a number of
rival firms already operating in the segment. Nevertheless, there is potential
growth in the market and it offers a route to expansion for the company. It
would require investing €170,000 in 2023 in additional warehouse capacity
and other fixed assets. John believes that the company could capture 10% of
the kid’s market each year from 2024 (total market size currently amounts to
50,000 pairs of sneakers annually). Each pair of kid’s sneakers is estimated
to generate a net profit of €10. (Assume that this will have no impact on
company sales in the men’s and women’s markets which will remain at
current levels, as will all other costs). The overall kid’s market will grow by
5% per year over the six-year planning period.
Q3: Constrained Optimisation and Scenario Analysis
Constrained Optimisation: John Moto believes that Ecosneak’s decision making
might benefit from more rigorous analysis. One potential technique that he
recalls from his Business Management studies at university is Linear
Programming. He thinks that the technique could be used in the analysis of the
company’s promotional campaign, but he has only a hazy recollection of what
Linear Programming involves and how it could help Ecosneak.
Until now, Ecosneak’s promotional campaign has been based largely on TV
advertising, targeting both men’s and women’s markets, but this has not proved
particularly effective. Jess, as marketing manager, has suggested that a
combination of Billboards and Magazine advertising (in the World of Sports) may
be a better approach in 2023.

University of Westminster, WBS Management Decision Making for Business	April 2022 5MNST006W.2
Decision Making for Marketing Managers	5MNST007W.2

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Scenario Analysis: The management team of Ecosneak would like to
separately model the first-year (2024) profit from entering the kid’s market
segment (Option 2, above), using scenario analysis. Assume a notional
fixed cost for the first year of €20,000 (€120,000/6) and a selling price of €60
per pair. Assume the variable costs for the bicycle (Purchase and Distribution)
can vary between €20 and €40, with a most likely value of €32 per pair. Firstyear demand for the bicycle is expected to range from 8,000 to 18,000 pairs,
with 13,000 units the most likely level of demand for the sneakers.
Required:
Q1. Decision making under risk and uncertainty
You are asked to use the information provided in the following matrix to help
decide on the preferred price for men’s sneakers in 2023. The payoffs indicate
the forecast change in revenue (in €000s) from men’s sneaker sales next year.

UK Economic Performance (2023)
Options	Recession	Stagnation	Growth
Increase Price	-100	110	600
Reduce Price	100	250	200
Price Unchanged	50	95	420

1.1 Which option would you advise, based on the following criteria?
(i) Maximax
(ii) Maximin
(iii) Minimax Regret (6 marks in total)
1.2 Assume now that Jess has been able to use published economic data to
derive the probability of the three ‘states of nature’ (UK Economic
Performance) occurring: Recession (40%), Stagnation (40%) and Growth
(20%). Assess the three options from a ‘rational’ or risk neutral
perspective. Which choice would you advise now? (4 marks)
1.3 You have been offered the opportunity to purchase information predicting
with absolute certainty the performance of the UK economy in 2023. What is
the maximum it is worth paying for this? (4 marks)
1.4 Write a brief report for Ecosneak summarising your findings and offering
advice on the best pricing option for them to choose. Make sure you
highlight the impact of uncertainty and differing attitudes to risk. (Maximum
150 words). (6 marks)

University of Westminster, WBS Management Decision Making for Business	April 2022 5MNST006W.2
Decision Making for Marketing Managers	5MNST007W.2

Q 7
2. Investment Options
Decide whether to invest in R&D or to expand into the kid’s sneaker market.
2.1Calculate the payback period for each option and suggest which should be
chosen by Ecosneak. Make sure you explain to the management team both
the shortcomings of the payback method and its strengths. (3 marks)
2.2Calculate the Net Present Value (NPV) for each option. Which option
would you recommend Ecosneak should choose giving your reasons. Use
a cost of capital of 8% for the option of R&D investment) and 9% for
expansion into the kid’s market (as it is perceived to be riskier). (7 marks)
2.3Explain, in principle, the approach you would use to calculate the Internal
Rate of Return (IRR) of a project/option. Illustrate this by calculating the
IRR of the R&D option. (4 marks)
2.4Write a brief report for Ecosneak summarising your findings and offering
advice on the best investment option for them to choose. Apart from the
results you have calculated, are there any other factors you might
consider? (Maximum 150 words). (6 marks)
Q3. Constrained Optimisation and Scenario Analysis
3.1 Explain to John what linear programming involves and the types of
problems it can help solve. (2 marks)
3.2 You are given the following data by Ecosneak:
• Their annual promotional budget (of €300,000);
• The cost of each Billboard advert (€2,000) and the cost of each
Magazine advert (€5,000);
• The estimated ‘reach’ of each Billboard advert (20% of the men’s and
women’s total market in 2022) and each Magazine advert (45% of the
men’s and women’s market in 2022);
• There is a signed contract with World of Sports that Ecosneak will
place at least 30 adverts per year in the Magazine;
• There is a limit of 100 on the number of dedicated Billboard spaces
available in Edinburgh for Ecosneak to use.
Use this information to formulate Ecosneak’s promotional campaign
as a linear programming problem, but do not solve. (6 marks)
3.3 Use the information given in the case study to undertake a scenario
analysis of first-year profits in the kid’s market. Set up the profit
‘model’ and use this to calculate ‘base-case’, ‘worst-case’ and ‘best-case’
scenarios for first year profit. (4 marks)

University of Westminster, WBS Management Decision Making for Business	April 2022 5MNST006W.2
Decision Making for Marketing Managers	5MNST007W.2

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3.4 Explain to Ecosneak management the value and limitations of using
scenario analysis as a decision-making technique. (3 marks)
Q4. Individual and Group Decision Making
Using your experience in the Sneakers Inc business simulation game and the
theory covered in the module, answer the following questions:
4.1Which group-decision making techniques did you use and in what kind
of situations? Provide specific examples from the game. (5 marks)
4.2What are the advantages and the disadvantages of group decisionmaking? In your answer provide examples of successful and/or
challenging group decisions in the game. (5 marks)
4.3What would you differently if you had to play the simulation game again
as a group and why? (5 marks)
Q5. Environmental and Social Impact
Based on your own research (and including the Week 11 seminar sources
provided on Blackboard) write a briefing report (of up to 500 words) for
Ecosneak covering the following areas:
5.1Outline the environmental and social impact of sneakers and the
sneaker ‘industry’ at different points in the ‘supply chain’. (8 marks)
5.2What would recommend sneaker companies to do to improve the
sustainability of their business operations? What specific advice would
you offer Ecosneak (and companies more generally) in the Sneakers
Inc simulation game? (12 marks)
__________________________________________________________
MARKING CRITERIA
You will be assessed on the extent of your:
• grasp of decision-making concepts and techniques
• ability to apply the acquired knowledge and skills in the simulation game,
• ability to reflect on your decisions and their impact on financial,
environmental and social performance
• ability to reflect on the differences between individual and group decision
making using theoretical concepts and experience

University of Westminster, WBS Management Decision Making for Business	April 2022 5MNST006W.2
Decision Making for Marketing Managers	5MNST007W.2

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University of Westminster, WBS Management Decision Making for Business	April 2022 5MNST006W.2
Decision Making for Marketing Managers	5MNST007W.2

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Please see more information about plagiarism here:
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