Motorking Company Case Study

904 Words 4 Pages
Register to read the introduction… Based on the forecasted profits, a decision tree was constructed using the past market research study conducted by DSI to provide a graphical representation of the decision-making process. It shows the natural or logical progression that will occur over time.

For the Motorking Corporation, the DSI tree estimates a profit of $1,885,137.50 in a strong economy and after subtracting the DSI fee of $20,000 leaves the corporation with $1,865,137.50 which is greater than $1,577,291 (This is Motorking’s Expected Value for Perfect Information). This proves that the Motorking should hire DSI to conduct a market survey.

The expected value approach is used to determine the expected value with perfect information (EVPI). The EVPI is obtained by subtracting the expected value without perfect information (EMV) from the EVPI.

The maximum payment that Motorking Corporation should pay for perfect information is $56,672.

Maximum payment for DSI services should be $327,846.88 ($1,885,137.50 –
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and is divided up by the type of additive, application (e.g., gasoline, diesel fuel) and market (blenders and terminals, refiners, aftermarket). The types of additives include detergents, carrier fluids, antifoam, dehazers, cetane improvers, antioxidants, dyes & markers, lubricity improvers, cold flow improvers, stability improvers, corrosion inhibitors, octane improvers, and anti-icing. The industry is currently led by North American but is growing in Asia-Pacific due to increased fuel demand. The market is expected to continue to grow in North America due to stricter environmental regulations and a desire for fuel efficiency. “A majority of fuel additives are consumed in diesel fuel applications. The diesel fuel additive market has been driven by the increasing Ultra Low Sulphur Diesel (ULSD) and bio-based diesel demand which requires significant amount of dosing.” The fuel additive market is highly competitive including several large and small companies. The industry is highly fragmented with a variety of products offered. Innospec Inc. (U.S.), BASF SE (Germany), and The Lubrizol Corporation (U.S.), are the most active companies in the fuel additives market. The top five companies together comprise nearly 40% of the market

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