Exotic Adventures Inc: The Amazon River Voyage
Case Synopsis
Exotic Adventures Inc (EAI) operates voyages along the full length of the Amazon River from Belem, Brazil, on the Atlantic Coast to Iquitos, Peru. They normally operate in high water season and were now offering trips during the low water season also. Unfortunately EAI received reports from Brazilian authorities that waters were unusually low this year but Peruvian authorities indicated all was fine.
State the Assignment Question
Due to the fact that EAI is receiving biased and conflicting information from the Brazilian authorities and Peruvian authorities, they must gather as much unbiased information as possible and draw their own conclusions. Should EAI take the trip all the way to Iquitos, Peru? Should they take a shorter version of the trip stopping in Manaus, Brazil? Or should they cancel the trip completely?
Case Analysis Exotic Adventure Inc. (EAI) is a company that operates expedition-style voyages primarily to the Polar Regions. The company typically operates voyages in March, which is high water season, offering one voyage upstream and a return voyage downstream. After much research EAI decided that it would start operating voyages in October the low water season and included it in the company’s brochure. By early August, 52 passengers booked the upriver voyage and 47 booked the downstream voyage, both in October. These numbers were just above break-even for the company (Shaw, 1999). In early September, EAI received messages from their agents in Brazil advising that water levels were unusually low due to El Nino. By late September, Brazilian agents informed EAI that their pilots, who were compulsory for the voyage, would not take the vessels pass Manaus, Brazil. This would obviously be in the best interests of the Brazilian authorities as there would be a lot of money to be made from the various stops that the passengers would make in ports and communities along the way (Shaw, 1999). On the other hand, EAI’s agents in Peru were advising that all was fine. It was also in the best interest of the Peruvians to ensure that the voyages took place. They too had a lot of money to be made from the various stops from the vessels (Shaw, 1999). On October 8th, the last day to call passengers with enough notice to cancel their voyage, all information sources had been reached and consulted (Shaw, 1999). With all of the information on the table EAI had three options to work with. The first option would be to cancel the voyage on October 8. This option would carry additional cost of $184,000 after all costs and refunds. The second option would be continue with voyage and if water levels dropped then the first leg of the trip would be cut short at Manaus with a probability of 20% the second leg would be cancelled. This option has $282,000 in additional cost after all cost and refunds. The third and final option would be to continue pass Manaus with a 50% chance of making it all the way to Iquitos. This option had additional cost of $292,000 after all costs and refunds. There are a few things that EAI must consider when making a final decision. First they must consider the information received from Brazilian and Peruvian authorities, although biased, they have to consider the probability of each event taking place. They must also consider the risk involved in taking the voyage, such as damage to the vessels and reputation of the company if things go wrong. The final thing they should consider the cost and expected monetary value (EMV) of each of the options presented to them. In this case, EAI is faced with a lot of biased information from both the Brazilian agents and Peruvian Agents. We will decide which is the most optimal decision based on the cost and expected monetary value (EMV) of each option. We will use various data analysis tools such as decision trees and sensitivity analysis from the Precision Tree Software.
Data Analysis to Support Decision
In cases where uncertainty is a key element such as this one, we have a few options available to us that can make the decision process a lot easier. To determine the optimal choice, we should take into consideration the EMV of each option. The EMV is the weighted average of the possible payoffs from a decision, weighted by their probabilities (Albright, Winston & Zappe, 2010). One way of examining the various EMV’s is using a decision tree. Decision trees show the sequence of events, as well as probabilities and monetary values. Figure 1 below illustrates the EMV’s for three available options of Amazon River voyage decision. Using the EMV criterion, we choose the decision with the largest EMV also known as playing the averages (Albright, Winston & Zappe, 2010). Now let’s look at the options again. Option one is to cancel the trip. If the company canceled the trip then they will incur additional cost of $184,000 and this has an EMV of -$172,400. If the company chose option two, which is to stop at Manaus, they will incur additional cost of $282,000. This option has an EMV -$172,400 which is the same as the previous option. The third and final option would be to take the trip all the way to Peru, stopping in Iquitos. This option has additional cost of $290,000 and an EMV of -$145,000. You will notice that all of the EMV‘s in this case are negative values, meaning that the option with the highest EMV would be option three. The next step in the decision analysis would be to perform a sensitivity analysis. Here we systematically vary inputs to the problem to see how (or if) the outputs or EMVs and the best decision change (Albright, Winston & Zappe, 2010). By altering the probabilities of the second option we noticed that final decision is highly sensitive. By changing the probability of having stop at Manaus due to low water from 20% to 29% we found that EMV changed significantly enough to change the final decision from true to false. I also did a sensitivity analysis in Precision Tree software and varied the costs of the trip of each stage. The charts show how the EMV varies with the total cost for both of the original decisions (take the trip or don’t take the trip). This type of chart is useful for seeing whether the optimal decision changes over the range of the input variable. It only does so if the two lines cross (Albright, Winston & Zappe, 2010). In Figure 2, it shows that taking the trip is the optimal decision up until cost reach approximately $340,000. When the cost exceeds this amount the optimal decision then becomes to cancel the trip.

Figure 2. Sensitivity Analysis for EAI if they stop at Manaus In Figure 3, it shows that taking the trip is the optimal decision up until cost reach approximately $320,000. When the cost exceeds this amount the optimal decision then becomes to cancel the trip. Figure 3. Sensitivity Analysis for EAI if they turn back at Iquitos
What Happened
Based on all of the information presented in this case, I feel the decision for the company would be to take the trip. When we put all the facts into the decision tree using the Precision Tree software, the model indicates that option three is the most beneficial. When we factor in the EMVs of each of the options, the option to take the trip had the highest EMV, therefore this would be the best option.

References
Albright, Winton, & Zappe (2010). Business modeling: QNT 5040 Nova Southeastern University (selection from 3rd ed.).
Shaw, P. (1999). Exotic Adventures Inc.: The Amazon River Voyage. Ontario: Ivey Publishing. EXOTIC ADVENTURE INC. 6