Decision Analysis for Managers

Assignment: Case Study Analysis - AMECO Relocation Decision Problem

This case study is based on a real case; of course, anonymized for obvious reasons. The case study considers the problem of Agricultural Machinery Exporters Company (AMECO), a company considering relocating its manufacturing facilities from the UK to an overseas country. In making its decision, the company needs to take into account a number of political risks that it will face if it decides to go ahead with the relocation. The decision problem is made complex by the large number of combinations of possible events that can occur and the challenges that arise from the need to structure the problem in a way which makes analysis of the problem tractable. Note that all of the monetary values presented in the case have already been expressed as present values to avoid the additional complication of applying discounted cash flow analysis to the data. Carefully read the case study (attached) and answer the question that follow.

Question (approximately 500 words in total, excluding decision tree diagram)

Using decision tree analysis, structure the decision problem faced by AMECO and recommend the alternative or strategy that the company should pursue to maximize expected savings. Explain/justify your recommendations.

Guidance notes:
- Present your decision tree diagrams, clearly showing all probabilities and net values at the end of the branches
- Follow the conventions of constructing decision trees, such as the basic shapes distinguishing decision nodes from chance nodes
- Explain/justify your recommendations

More guidance notes on applying decision tree analysis on the AMECO decision problem

A decision tree model can be used to analyze this decision. Because of the size of the problem, it is suggested that you break down the decision trees into four sub-trees as follows:

Decision Tree 1: Depicts the decision that face the company in planning for the first 5 years of potential operation in Almeria

Decision Tree 2: Depicts the decision for second 5 years if savings in the first 5 years are high

Decision Tree 3: Depicts the decision for second 5 years if savings in the first 5 years are medium

Decision Tree 4: Depicts the decision for second 5 years if savings in the first 5 years are low Decision trees 2, 3 and 4 are best constructed first so that the optimal expected savings that they indicate can be ‘rolled back' and added to the savings for the first five years in decision tree 1.

Attachment:- Decision Analysis for Managers.rar