UEH UNIVERSITY

UEH COLLEGE OF BUSINESS

SCHOOL OF INTERNATIONAL BUSINESS - MARKETING

ESSAY

Subject: Business Modeling and Applications

Lecturer: Dr. Ha Quang An

Course ID: 22C1BUS50320203

Prepared by: To Viet Hoang (31211025584)

 UEH UNIVERSITY

UEH COLLEGE OF BUSINESS

SCHOOL OF INTERNATIONAL BUSINESS – MARKETING

ESSAY FOR FINAL EXAM

Subject: Business Model Applications
 Endorsement
I commit that this essay developed by myself alone and not copied from any other
students or organizations.

LECTURER’S COMMENT
Table of Contents
1. Linear programming...................................................................................5

1. Set up an algebraic model - which clearly states the Solution, Problem

Objective, and Constraints.............................................................................5

2. Solve with SOLVER....................................................................................5

4. Conclusion....................................................................................................5

5. Sensitivity analysis – what is the Shadow Price of this problem?...........6

6. DuoCera sees small bricks selling well and doing well so they are trying
to produce only small bricks. So under what conditions should DuoCera
produce ONLY SMALL Brick?.....................................................................7

7. Because of some technical issues, the brick kiln had to be cut down by
3 hours/week – that is, only 37 hours a week instead of 40 hours like the
original. So has DuoCera's production plan changed?................................8

2. Decision making...........................................................................................8

1. In the initial case, which brick kiln should DuoCera use, and why?......8

2. Should DuoCera take a survey if it's free? And if there is a fee from
how much does it cost DuoCera won't accept surveys?...............................9

3. Network Distribution................................................................................11
 1. Linear programming

1. Set up an algebraic model - which clearly states the Solution, Problem Objective,
and Constraints.
L= Number of large type

S= Number of small type

R= Total revenue

Choose the values of L and S so as to maximize

4700000L+5900000S= R

Subject to satisfying all the following constraints:

0.3L+0.25S<=60

0.27L+0.58S<=105

0.16L+0.2S<=40

32.8L+20S<=6000

2. Solve with SOLVER

4. Conclusion
The number of batches of large type and small type is 57 and 155 respectively, which will
help maximize revenue
5. Sensitivity analysis – what is the Shadow Price of this problem?

Cutting

Cutting constraint: 60-4.3 ≤ RHS1 ≤ 60 +∞

-> 55.7 ≤ RHS1 (no upper limit)

If we increase R.H. Side to 1 unit between 55.7 and +∞, the R value will increase exactly
equal to the shadow price (0)

Firing

Firing constraint: 105-8.4 ≤RHS2 ≤ 105+11

-> 96.6 ≤ RHS2 ≤ 116

If we increase R.H. Side to 1 unit between 96.6 and 116, the R value will increase exactly
equal to the shadow price (103093.7835)

Covering

Glazing constraint: 40-3.8 ≤ RHS3 ≤ 40+1.6

-> 36.2 ≤ RHS3 ≤ 41.6

If we increase R.H. Side to 1 unit between 36.2 and 41.6, the R value will increase exactly
equal to the shadow price (29201030.93)

Material

Raw material constraint: 6000-1047 ≤ RHS4 ≤ 6000+∞

-> 4953≤ RHS4 (no upper limit)

If we increase R.H. Side to 1 unit between 4953 and +∞, the R value will increase exactly
equal to the shadow price (0).

6. DuoCera sees small bricks selling well and doing well so they are trying to
produce only small bricks. So under what conditions should DuoCera produce
ONLY SMALL Brick?
In this case, we will have to adjust the price of two products

a. Increase price of small brick

The allowable increase for small brick is 4196296.2962963. If the price of small brick
increase more than 4196296.2962963, the optimal solution will be adjust.

b. Decrease price of large brick

The allowable decrease for large brick is 1953448.276. If the price of small brick increase
more than 1953448.276, the optimal solution will be adjust.
In conclusion, if the price is adjusted until suitable price in both case, the DuoCera should produce
only small brick.

7. Because of some technical issues, the brick kiln had to be cut down by 3
hours/week – that is, only 37 hours a week instead of 40 hours like the original. So
has DuoCera's production plan changed?

We can obviously see that with 37 hours available for covering the production of large
and small type will be 12 and 176 batches respectively. Therefore, there is an decrease in
total revenue, approximately 1091262887.

2. Decision making

1. In the initial case, which brick kiln should DuoCera use, and why?

Total profit = Revenue – Total cost = 5,900,000 * Quantity – Production cost * Quantity –
Fixed cost

The batch of bricks can be processed at the joint factory in Vinh Long with a fixed cost of
120,000,000 VND/month equal to 1,440,000,000 VND/year
DuoCera should invest in Vinh Long because the expected payoff in Vinh Long is higher than
this figure in Dong Nai. The expected payoff for a particular decision alternative can be
interpreted as what the average payoff would become if the same situation were to be repeated
numerous times. Therefore, on the average, repeatedly using Bayes’ decision rule to make
decisions will lead to larger payoffs in the long run than any other criterion (assuming the
prior probabilities are valid).

2. Should DuoCera take a survey if it's free? And if there is a fee from how much
does it cost DuoCera won't accept surveys?
Possible findings from a external reality survey:

Favorable (FNC): the number of customers will tend to buy more

Skeptical (SNC): the number of customers will tend to buy less

P(FNC | strong) = 0.6  P(strong and FNC) = P(strong)*P(FNC | strong) = 0.62*0.6 = 0.372

P(FNC | moderate) = 0.2  P(moderate and FNC) = P(moderate)*P(FNC | strong) = 0.38*0.2

= 0.076

P(SNC | strong) = 0.4  P(strong and SNC) = P(strong)*P(SNC | strong) = 0.62*0.4 = 0.248

P(SNC | moderate) = 0.8  P(moderate and SNC) = P(moderate)*P(SNC | moderate) =

0.38*0.8 = 0.304

We can calculate favorable and skeptical probabilities, stood at 0.448 and 0.552 respectively,
by combing the results of the 4 calculations above.
 According to QM, DuoCera should conduct a survey if it’s free. The reason for this is that
The survey will help DuoCera evaluate the market and make right decision.

EP (without more info) = Expected payoff from applying Bayes’ decision rule with the
original prior probabilities

EP (with perfect info) = Expected payoff if the decision could be made after learning a
true state of nature

EVPI = Expected value of perfect information

C = Cost of obtaining more information

EVPI = EP (with perfect info) – EP (without more info)

= 16058590 – 16056000

= 2590$

So, if C > EVPI (2590$), DuoCera can consider whether they should conduct the survey
 3. Network Distribution

Appropriate route:

Đồng Nai- Bàu Hàm- Tân Nghĩa- Tân Hải- Suối Đá- Cà Ná- Ninh Thuận