...Freemark Abbey Winery Case The Freemark Abbey Winery must decide whether to harvest their grape crop before or after an incoming storm. If the storm is light there is a chance of the grapes developing a mold, which is beneficial to the flavor and increases the wine’s value. There is also a possibility that the grapes will not become botrytised and will simply absorb water which will reduce the wine value. There are a number of options available to the winery in this situation. The grapes may be harvested immediately, resulting in a reduced revenue. This option is low risk, but also has low return as the grapes will reach a market value of $2.85 per case. If harvested and sold in bulk the grapes will be values at only $1.00 per case. If 12,000 cases are produced the total revenue will be $34,200 maximum and $12,000 minimum. The advantages of this are that the entire grape crop is not going to be lost (low risk), that there will be a guarantee of some profit, and that production can begin earlier. On the other hand there is a higher likelihood of a low return, particularly on the grapes sold in bulk. If the grapes are left on the vine and a storm does not come they will only ripen more. This option could lead to equal or greater profits than those found by harvesting immediately. The grapes left on the vine will have the potential to develop to bring in anywhere from $30000 to $46000. The disadvantages of this option would be the potential that the grapes’ sugar will not develop...
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...information you provided on the imminent storm and its potential consequences, I have made significant headway in determining what course(s) of action Freemark Abbey Winery can take confidently. However, more important than what the two page summary explains is the information it disregards. The limited scope of information in regards to harvesting options, brand reputation, competitive analysis, managerial risk tolerance, and consumer preferences contribute to a considerable framing bias. Additionally, we have failed to consider the decision of when/how to harvest the Riesling grapes from the perspectives of the various parties involved, including but not limited to other owners, your families, company shareholders, competitors, employees, retailers, and your own. These perspectives are essential in formulating the appropriate problem from which to solve your dilemma. If short-term profit maximization is your goal, with no regard for any of the considerations listed above (a non-exhaustive list), then your best alternative is not to harvest any of your Riesling grapes before the storm. Your Expected Monetary Value for this option is $3.27/bottle; you could expect revenues of $39,240. The highest expected revenue given the “No Harvest” decision is $67,200 ($8.00/bottle), and the lowest is $24,000 ($2.00/bottle). Given Freemark Abbey’s aspirations to compete with Chateau Lafite-Rothschild products, however, it would be short-sighted to ignore the impact of a sub-standard product...
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...William Jaeger From: Consulting Group Date: January 19, 2013 Subject: Options and Best Practices for Winery From my research, word of mouth and your product itself, I am aware that Freemark Abbey Winery’s reputation is one of its greatest strengths. However, I understand that the weather plays as both a threat and opportunity for the wine industry as a whole. There are reports of a rainstorm in route to Napa Valley with a 50% chance of striking your winery; this is why you have reached out to my firm, Consulting Group. We have carefully analyzed all options and are ready to offer our recommendation. Problem Freemark Abbey Winery is known for producing premium wines; nevertheless, not choosing the best action to take in anticipation of this rainstorm may hinder your ability to even produce a premium wine for sale this quarter. A decision tree was constructed to weigh out Freemark Abbey Winery’s options. The winery has two alternatives: 1. do nothing and wait for the storm to greet the winery or 2. harvest the grapes immediately to avoid the rainstorm’s effects. Both options yield vastly different alternatives that we deem critical to your winery’s profit, revenue and reputation. Evaluation If Freemark Abbey immediately harvests its grapes, it incurs little risk and no further worry at first glance. Conversely, this option allows the winery to harvest “not quite-ripe grapes” resulting in weak revenues. This option contributes $2.85 of profit per bottle...
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...Freemark Abbey Strategic Decision Making Problem Freemark Abbey has an invaluable reputation as a winery that produces high quality, premium wines from the best variety of grapes. The quality and brand built throughout the years is the cumulative result of making well thought out, informed decisions that have earned Freemark Abbey the respect and demand in the winemaking industry. Several considerations are given in producing a consistently high quality product. The seeds, soil, weather, maturation time of the grapes, timing of the harvest, fermentation time, acidity and sugar levels all play an important role in product delivery. Careful consideration must be given in order to uphold one of Freemark Abbey's greatest strengths, it's reputation. For this decision, we considered multiple points in the decision making process, considering the probability of rain, sugar and acidity levels, as well as the possibility of botrytis mold forming after a potential rainstorm. With reports of a rainstorm ahead with a 50% chance of it striking the winery, we constructed a decision tree and analysis to help guide the decision process and support the resulting recommendation. Initially, Mr. Jaeger is faced with two options; harvest the grapes immediately or wait for the storm to occur at a 50% probability. The options provide very different outcomes that will ultimately affect the winery's earnings and brand. If the grapes are harvested immediately, there is very list risk...
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...that would sell wholesale for only about $2.00 per bottle and costing Freemark Abbey Winery its reputation. It could sell the wine in bulk or sell the grapes directly to preserve its reputation but these options would bring only half as much revenue, which is the second decision problem. Hence, Freemark Abbey Winery might be better off harvesting immediately before the storm and eliminating the risk of the rain spoiling the grapes. The not-so-ripe grapes could yield wine that sells for $2.85 per bottle. If Jaeger decided to harvest later and the storm did not strike, there is a high chance that the acidity of the grapes would not fall below about 0.7 percent. In this case, the resulting wines would still sell at a higher price than wine produced from the not-so-ripe grapes harvested now, regardless of what the weather condition is like. However, there is a slight chance that the acidity of the of the grapes would drop below about 0.7, in which case the resulting wine would sell at a slightly lower price of $2.50 per bottle. To make this decision, a decision tree, Michael Porters (1997) five forces analysis, and SWOT analysis are used to aid in the decision making process. Both five forces analysis and SWOT analysis reveal that Freemark Abbey Winery should pursue a differentiation strategy. The bargaining power of customers for small wineries is lower than that for mid-size wineries. Small wineries in areas frequented by tourists can...
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...Decision Analysis DISC 321 Case 2 Group 3 Hafsa Siddique 17110055 Faisal Ali 17110282 Aleem ud din Khan 17110267 Hassaan Butt 17110117 We first divided the mess being analyzed into a clear, structured problem statement as follows Objective: To decide if Freemark Abbey Winery should harvest the Riesling grapes immediately or leave them on the vines despite the approaching storm. Assumptions: 1-We assumed that the list of possibilities provided is mutually exclusive as well as exhaustive. This means that either one has to occur, as well as no other possible option exists. 2-The payoffs are calculated based on 1000 cases of wine. 3-The given probabilities accurately reflect reality Analysis: At the moment Freemark Abbey Winery has two alternatives: to harvest or not to harvest. If they choose not to harvest there is 50% chance that storm might hit. And if the storm hits there is a probability of 40% that Botryis mold will form which will significantly affect the revenue. Freemark Abbey Winery faces another decision if the storm hits and Botryis mold will not form, because if Botryis mold will not form the sugar level which determines the quality of wine and revenue will be different, so the decision that they faces is that whether to sell the grapes in bulk or to make and sell the wine themselves. If the storm hits and mold is formed then the revenue will be 67,200 but the chance of this happening is only 40%. As compared to this there is a 60% chance that mold...
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...Arkansas State University | Freemark Abbey Winery | Team 1 | | Assignment | 11/28/2012 | | Case Summary Freemark Abbey Winery should make a decision whether to harvest or not, taking into consideration the possibility of rain. Rain may damage the crop but delaying the harvest would be risky too. Keeping in mind rain could be beneficial and will increase the value of the resulting wine. This decision is complicated by the fact that ripe Riesling grapes can be converted to wine in two ways, resulting in two different types of wine. Factors that should be taken into consideration Probability of rain, mold formation, acidity, sugar level, wine price, and reputation. Mr. Jaeger’s possible choices: Harvest now or later. Solution: The payoffs are calculated based on 1000 cases of wine. 1. There are two alternatives: * Waiting (W) for the storm to come. * Harvest (H) now. * If he waited, the storm may or may not hit. * If the storm hits, the mold may or may not form, which greatly affect the revenue. * If the storm hits and no mold form, the sugar level which determines the quality of the wine is uncertain. The quality of wine produced affects the company’s reputation. * If storm hits and mold do not form: Sell the grapes in bulk (B), or make the thin (light) wine and sell it (T). * The best decision: Where the expected value (EV) maximizes current returns. * The blue values represent selling the harvest in bulk (B)...
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...Decision Analysis Case Study FREEMARK ABBEY WINERY Khurram Masood’s section HLCC Consulting Inc. Julian Hong Nicolas Liao Alan Chen Cheng-Chieh Chao Decision Basis Information Probability of rain, mold formation, acidity, sugar level, wine price, reputation value, detector accuracy, spores effectiveness, immigration law Mr. Jaeger’s Alternatives Harvest now or later Use detector or not Buy spores or not Sell in bottle or bulk Mr. Jaeger’s Preferences Prefers more money than less Cares about reputation Uncertainties Probability of rain, mold formation, acidity, sugar level Decision Diagram Detector/ No Detector Rain/ No Rain Detector Prediction Acidity Level Harvest/ Not harvest Spores/ No Spores Botrytise/ Thin wine Sugar Level Immigration Law Passed/Failed Bottle/ Not Bottle Value $ Decision Tree Harvest Now Immigration Law Passed Rain Immigration Law Failed Immigration Law Passed Buy Spores No Rain Immigration Law Failed Mold Develops Mold Develops Low Acidity >= 25% Normal Sugar Acidity < 25% Sugar Low Acidity >= 25% Sugar < 25% Sugar Mold Develops Sell Wine In Bulk No Mold Sell Wine Case Mold Develops Sell Wine In Bulk No Mold Sell Wine Case Low Acidity >= 25% Normal Sugar Acidity < 25% Sugar Low Acidity >= 25% Normal Sugar Acidity < 25% Sugar Normal Acidity Do Not Rent Weather Detector Immigration Law Passed Harvest Later Rain ...
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...CONNECT FEATURES Interactive Applications Interactive Applications offer a variety of automatically graded exercises that require students to apply key concepts. Whether the assignment includes a click and drag, video case, or decision generator, these applications provide instant feedback and progress tracking for students and detailed results for the instructor. Case Exercises The Connect platform also includes author-developed case exercises for all 12 cases in this edition that require students to work through answers to assignment questions for each case. These exercises have multiple components and can include: calculating assorted financial ratios to assess a company’s financial performance and balance sheet strength, identifying a company’s strategy, doing five-forces and driving-forces analysis, doing a SWOT analysis, and recommending actions to improve company performance. The content of these case exercises is tailored to match the circumstances presented in each case, calling upon students to do whatever strategic thinking and strategic analysis is called for to arrive at a pragmatic, analysis-based action recommendation for improving company performance. eBook Connect Plus includes a media-rich eBook that allows you to share your notes with your students. Your students can insert and review their own notes, highlight the text, search for specific information, and interact with media resources. Using an eBook with Connect Plus gives your...
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