INDIAN INSTITUTE OF MANAGEMENT BANGALORE

Spreadsheet Models for Business Decision Problems

Term-III

Assignment 1[1]
(Due 11:30 pm, Jan 7th 2014)

Malgudi Tindi Room (MTR) Inc. is a well-known food processing major operating from Bangalore. Its product offerings vary from assorted pickles, instant packaged foods (dosa mix, idly mix etc), spices and snacks. It is looking at developing a new microwavable ‘chinese food tray’ consisting of sweet corn soup in a plastic pouch, ‘hakka’ noodles and gobi manchurian. This product is targeted towards young urban working professionals and families with young working parents. Based on an initial analysis, the decision makers at MTR Inc have arrived at the following scenarios:

1. The duration of the product life cycle could be two, four, six or eight years, with the probability decreasing with increasing cycle duration. Specifically, the probability of it being 2 years is 0.5, four years is 0.25 and it being six or eight years is 0.125. Essentially, the decision makers are unsure, since product life cycle duration is a function of such intangibles as changing consumer tastes and lifestyle patterns, which are hard to predict as the life cycle span increases. 2. If introduced nationally, the potential market is about 2 lakhs. This market is assumed to grow 5% annually on average. However, the growth rate will vary randomly with a standard deviation of 1%. Assume a normal distribution. 3. The decision makers at MTR believe that in Year 1, their share of the potential market would most likely be 40%, at worst 20%, and at best 50%. All values between 20% and 50% are possible, with the likelihood decreasing ‘linearly’ as the values move away from 40%. Further, the average number of buys per ‘MTR’ customer is 10 chinese food trays per year. Assume this average to be normally distributed with a standard