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APA
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Business & Marketing
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Case Study
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English (U.S.)
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Topic:

Kenneth Brown is The Principal Owner of Brown Oil

Case Study Instructions:

Unit V Case Study
See Problem 3-17 on page 101 of the textbook. Kenneth Brown is facing three alternatives with two possible outcomes—a favorable or an unfavorable market—for those alternatives. In no less than three pages, describe and justify the decision-making steps Brown may perform in his case. What decision would you make? Be sure to provide research to support your ideas. Use APA style, and cite and reference your sources to avoid plagiarism.
Course Textbook(s)
Render, B., Stair, R. M., Jr., Hanna, M. E., & Hale, T. S. (2015). Quantitative analysis for management (12th ed.). Upper Saddle River, NJ: Pearson.
Problems
^•3-17 Kenneth Brown is the principal owner of Brown Oil, Inc. After quitting his university teaching job, Ken has been able to increase his annual salary by a factor of over 100. At the present time, Ken is forced to consider purchasing some more equipment for Brown Oil because of competition. His alternatives are shown in the following table:EQUIPMENT FAVORABLE  MARKET  ($) UNFAVORABLE  MARKET  ($)Sub 100 300,000 -200,000Oiler J 250,000 -100,000Texan 75,000 -18,000
For example, if Ken purchases a Sub 100 and if there is a favorable market, he will realize a profit of $300,000. 

Case Study Sample Content Preview:

Favorable and Unfavorable Market
Author Name
Institutional Affiliation
From this case study, it is evident that Kenneth Brown owns Brown Oil Inc. After leaving his teaching job, he has successfully increased his annual income by a factor of over 100 (Wang, 2016). Presently, Kenneth is thinking to buy new equipment for Brown Oil due to increased competition and demand. His alternatives are Sub 100, Texan and Oiler J. In case Kenneth Brown decides to buy a Sub 100, the market is likely to be favorable and he will get a profit of $300,000. If the market remains unfavorable, he will have to bear losses of up to $200,000.
The Type of Decision
Kenneth Brown has always been an optimistic decision-maker, and the type of decision he is facing is Decision-Making under Uncertainty. In this type of a decision, a person has to make the decision without having an idea of what could be the outcomes in the coming days (Wang, 2016). In simple words, we can say that Kenneth Brown has many unknowns. There is no chance for him to know or say what could occur in the future to alter the outcomes of his decision. He has three types of equipment in his mind: Sub 100, Oiler J and Texan. He wants to go with all of them, but the final decision of choosing the best alternative can be made depending on the market. If the market is favorable, then all these alternatives can benefit him and his company. In case the market is unfavorable, then all of these alternatives will prove to be worthless. However, it is not possible to say whether the market would be favorable or unfavorable. This is what we call Decision-Making under Uncertainty. Let’s suppose that Kenneth Brown decides to buy a Sub 100 when the market is favorable. He is expecting a profit of $300,000, but all of a sudden the market becomes unfavorable. This leads Ken to lose nearly $200,000. There is nothing that he can do to recover the losses. The basic problem is that he makes decisions optimistically, but he cannot predict whether or not those decisions would benefit him and his company in the long run.
The Best Decision Criterion for Kenneth Brown
For Kenneth Brown, the best decision criterion is Maximax. This strategy is typically used by optimistic decision-makers (Wang, 2016). Here, ...
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