Vikram Dhawan, president of Harimann International, has a long standing customer that needs an order completed by April 6 (Bodily, Carraway, Frey, Jr., & Pfeifer, 1998, p. 483). Dhawan is faced with several potential issues that may prevent him from being able to fulfill this order, however he feels he can reconsider his process in order to meet the expectations of his client, Pioneer Trading Company, Ltd. Dhawan knows loosing Pioneer as a client is a very big possibility if he fails to meet the deadline, therefore he recognizes his reputation is at stake. If Dhawan take the order for Pioneer, he will gain value by getting incentives from the Indian government valued at $281,238 (Bodily, et. al., 1998, p. 483-484).
Decision problem Since Dhawan is trying a new process called parallel processing in order to be able to make the deadline, he knows the risks associated are higher than normal. He normally only faces a 20% chance of missing the deadline, but he assumes that risk is doubled with the reduction in production time. This process poses the threat of additional problems in the production process (Bodily, et. al., 1998, p. 489).
Decision Evaluation and Alternatives
According to the decision tree, Dhawan should take the order because the probability is higher that he will make a profit. There is a 60% chance that he will make the deadline for a profit of $315,238. If Dhawan misses the deadline, he will lose revenue as he expects there is an equal opportunity Pioneer will pay either 50% or 30% of the contract price. If he makes the deadline or receives 50% of the contract price, he will earn a profit on the order. However, there is still a 40% chance he will only make 30% on the contract price thus yielding a loss of $30,142. There is also a 20% chance that Pioneer will only pay 20% of the contract price, which results in a loss of $79,482. Since the probability of Dhawan missing the deadline is only 40% compared to the 60% chance he will make the deadline, it is likely that he will make the full profit (Bodily, et. al., 1998, p. 487). Dhawan…