Running Head: CASE STUDY
Case 1: Bell Computer Company
The bell computer company has only two options of carrying out the expansion. The two options
are the large scale and the medium scale. With the use of the options of expansion, the medium
scale expansion, and the large-scale expansion, the demands can either be high, medium or low
depending on the probability of 0.3, 0.5 and 0.2 respectively (Keeney, & Raiffa, 1993).
In the option of medium scale expansion, the profits may exist as follows in case of high,
medium and low demand, $200,000, $150,000 and $50,000 respectively. For the option of largescale expansion, the profits may appear as follows in case of high, medium and low, $300,000,
$100,000 and $0 respectively.
The current management is facing a tricky dilemma of whether to use the large-scale expansion
or medium scale expansion. The large-scale expansion has a high potential of generating a higher
amount of profits in case of experiencing a high demand. The large-scale expansion will thus
generate a lower profit than the medium scale expansion when in the case of low and medium
demand. During the low demand, the large-scale expansion will give out an output result in nil
profit. In this case, it’s clear that the large-scale expansion gets under a high risk of the low scale
expansion. The anticipated action value is thus the expected value in the case. Generally, various
possible outcomes come as a result of an action. In this case to every action, we thus need to
determine the main probability of occurrence for every outcome got from the action (Keeney, &
The value expected is thus calculated by using finding the product of every possible outcome
with their probability of occurrence and adding the all the values respectively so as t...