Your company?s new portable phone/music player/PDA/bottle washer, the RunMan, wi

Question

Your company?s new portable phone/music player/PDA/bottle washer, the RunMan, will compete against the established market leader, the iNod, in a saturated market. (Thus, for each device you sell, one fewer iNod is sold.) You are planning to launch the RunMan with a traveling road show, concentrating on two cities, New York and Boston. The makers of the iNod will do the same to try to maintain their sales. If, on a given day, you both go to New York, you will lose 800 units in sales to the iNod. If you both go to Boston, you will lose 550 units in sales. On the other hand, ?f you go to New York and your competitor to Boston, you will gain 1,700 units in sales from them. If you go to Boston and they to New York, you will gain 700 units in sales. What percentage of time should you spend in New York and what percentage in Boston? You should spend of your time in New York and in Boston. How do you expect your sales to be affected? The expected outcome is a net gain in RunMan sales. The expected outcome is a net loss of RunMan sales. The expected outcome is no net gain or loss of RunMan sales.

Explanation / Answer

2 cities that needs to be covered = New York and Boston

Probability of you going to new york = 1/2

probability of you going to boston = 1/2

Similarly, probability of iNod going to new york and boston is 1/2 and 1/2 respectiveley.

Now, when you are in New York, there are 2 possibilities regarding iNod - they are in new york or they are in boston.

Probability that you are in new york and iNod is also in new york = 1/2*1/2 = 1/4

Probability that you are in new york and iNod is in Boston = 1/2*1/2 = 1/4

So, if both players are in new york, the loss in sales is 800 units*probabilty = 800/4 = 200 units (loss)

If you are in New york and iNod in Boston you gain 1700 units. gain (considering the probability) = 1700/4 = 425 units gain

So, the time that you spend in new york results in net gain of 425 - 200 = 225 units. (gain - losses)

If both companies are in Boston, then loss in sales (keeping probability in mind) = 550/4 = 138 units loss (rounded off to the nearest dollar)

If you are in Boston and iNod in New York gain in sales (keeping probability in mind) = 700/4 = 175 units

Net gain from being in Boston = gain - losses = 175-138 = 37 units

Thus, staying in New York results in gain of 225 units, while staying in Boston results in gain of 37 units. So the company should spend 100% time in New York and 0% time in Boston.

The expected outcome is net gain (gain of 225 units) in Run Man's sales.

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