Data-Driven Dec

QUM2
Task 2: Decision Tree A

Overview o
Managers are requi
make in their busin
improve your abilit
attachment's scenar
“Decision Tree Res
data set, you will pe
report that you will

To Comple
Enter your Student

Enter Your Stu

Note: To get credit f

Data-Driven Decision Making
QUM2
Task 2: Decision Tree Analysis

Overview of Assessment
Managers are required to organize, interpret, and display data that is relevant to the real-world business decisions they mu
make in their businesses. Business decisions must be based on relevant and reliable data. The use of analytical tools will
improve your ability to use data to make informed decisions. In this task, you will address the business situation in this
attachment's scenario. You will access the scenario and data set by entering your student ID number in this “Start” tab of
“Decision Tree Resources” attachment. The scenario and data set are located in the “Decision Tree Scenario” tab. Using t
data set, you will perform a decision tree analysis, and recommend a solution. This recommendation will be included in a
report that you will write, summarizing the key details of your analysis.

To Complete the Assessment:

Enter your Student ID below. Once you have entered your Student ID, click "Next" to begin the assessment.

Enter Your Student ID:

10521797

Note: To get credit for your work, you must enter your Student ID number correctly.
 siness decisions they must
of analytical tools will
siness situation in this
ber in this “Start” tab of the
ee Scenario” tab. Using this
ion will be included in a

assessment.

Next >
Task 2: Decision Tree Analysis Scenario

Decision tree analysis is used to determine a recommended decision alternative or an optimal decision strategy when a decision maker is faced with an uncertain and risk-filled pattern of
future events. The goal of decision tree analysis is to identify the best decision alternative, or the optimal decision strategy, given information about the uncertain events and the possible
payoffs of selections.

You are the chief operating officer (COO) at the Major Pharmaceutical Company (MPC). The chief executive officer (CEO) of MPC has asked you to review the company business plan for drug
line development. You have been given a market research report which includes the state of the drug marketplace with probabilities and payoffs (you will see this below and also on the "Data
Analysis Template" tab).
You are charged with presenting an analysis report of the plan, including recommending a course of action. The CEO wants to know the best immediate action, along with a backup action, and
wants clarity on the basis of your recommendations.

You will consider the following possible active alternative actions: 1) develop a new drug (exploration) or 2) focus on modifications to an existing drug (exploitation of new applications). Within
these two alternatives, there are two possible states for market conditions. You must consider the probability of success and the payoffs to determine the course of action based on the
calculated expected values.

You have been provided with the market research report data.

You are to use the data from the market research to complete the task, including payoff boxes on a decision tree diagram. Then, you may use the lower table on the template to show how you
determined expected values for each state of nature node.

MARKET RESEARCH REPORT Next >

MPC contracted with Drug Markets Analysts Inc. (DMA). Based on competitive research, DMA has found that there
are new competing drugs recently granted FDA approval. MPC will need to be aware of the competition in the
market as they consider whether to develop a new drug line, exploit the existing drug line for potential new
applications, or simply continue with the current drug line at this time. The new formula is a clear advancement
developed under strict guidelines and is scheduled for FDA approval in the first quarter of the year. Currently,
there are only two other widely available products on the market that meet the same needs. In a highly favorable
market that is supported by MPC's drug offering being considered the better solution, a new drug line with have
77% likelihood of success with a demand of 4966 units per month, the existing drug will have a 61% likelihood with
a demand of 5377 units per month, and making no changes will be 89% likely to succeed with a demand of 1101
units per month. In an unfavorable market, a new drug line will have a demand of 1205 units per month, the
existing drug will have a demand of 1807 units per month, and making no changes will have a demand of 541 units
per month. Profits are estimated to be 0.67 per unit for the new drug line, 0.99 per unit for the existing drug line
with new FDA-approved uses, while the current profit is 0.83 per unit.

Please remember to save this file.

Guidance:
YOU WILL USE THE SCENARIO AND MARKET RESEARCH REPORT TO COMPLETE THIS TASK.

MARKET RESEARCH REPORT

MPC contracted with Drug Markets Analysts Inc. (DMA). Based on competitive research, DMA has found that there are new competing drugs recently granted FDA approval.
MPC will need to be aware of the competition in the market as they consider whether to develop a new drug line, exploit the existing drug line for potential new
applications, or simply continue with the current drug line at this time. The new formula is a clear advancement developed under strict guidelines and is scheduled for FDA
approval in the first quarter of the year. Currently, there are only two other widely available products on the market that meet the same needs. In a highly favorable market
that is supported by MPC's drug offering being considered the better solution, a new drug line with have 77% likelihood of success with a demand of 4966 units per month,
the existing drug will have a 61% likelihood with a demand of 5377 units per month, and making no changes will be 89% likely to succeed with a demand of 1101 units per
month. In an unfavorable market, a new drug line will have a demand of 1205 units per month, the existing drug will have a demand of 1807 units per month, and making no
changes will have a demand of 541 units per month. Profits are estimated to be 0.67 per unit for the new drug line, 0.99 per unit for the existing drug line with new FDA-
approved uses, while the current profit is 0.83 per unit.

A. Describe a business question that could be answered by applying decision tree analysis and is derived from the scenario.

B. Identify the relevant data values required for your decision tree analysis, including the following: • probabilities • payoffs • profits • demand

C1. Complete a decision tree diagram, including each of the following: • state-of-nature nodes • calculated payoffs, each expressed out to two decimal places • expected
values, each expressed out to two decimal places

PAYOFF

Calculate the Expected Value of each node.

State of Nature
Enter decision selection based on EV (your final decision node):

Calculation for Expected Value (EV)

State of Nature

Calculation for Expected Value (EV)

State of Nature

Calculation for Expected Value (EV)