Exotic Adventures Inc. is a company dedicated to provide customers with expedition style voyages. Their primary products are trips to the Polar Regions but because these are done just in the summer time, they also offer trips to the Amazon River during other times of the year. Voyages go from Brazil to Peru and are done during high water season. Suggestions from naturalists plus extensive research made them include trips to the Amazon during the low water season. Problems arouse when the company got informed by their Brazilian agents that the water level was too low to navigate while their Peruvian agents were stating everything was ok. At this point 52 passengers had already booked their trips and now EAI has to decide based on bias information to either cancel the trip or continue with it.
In order to reach to the most cost effective alternative, a decision tree was performed using the information gathered from all sources including costs and probabilities. Along with it, a sensitivity analysis was completed which helped me determine the effect a change in costs would have on the final decision.
With these two decision tools, I was able to conclude that if the trip gets cancelled the company will have a guaranteed loss of $ 184,000 while if they continue with the trip the estimated loss will be less at $172,400, and they will still have a high probability of making it all the way to its destination with out incurring in any additional costs. Based on this analysis I can recommend to EAI that the best alternative is to continue with the trip as planned.
Exotic Adventures Inc. operates expedition style voyages mainly to the Polar Regions during the summer and austral summer. To offset costs they also offered expedition trips to the Amazon River from Belem, Brazil to Iquitos, Peru during the high water season in March. Some experts have suggested that the voyages would be more interesting if done during the low water season in October. After some research, it was learned that even in the low water season the water levels were never below 18 ft providing enough room for the 14 ft vessel to navigate the river, based on this information EAI decided to offer the new voyage and by August 52 passengers had booked the trip that was schedule to depart in October. The problem began when in early September the company received information from their agents in Brazil that the water levels were unusually low making it impossible to navigate the river, but on the other hand their Peruvian agents were saying that the water levels were high enough to navigate. It was in the best interest of both countries to keep the voyages in their waters, hence unfortunately EAI had to make a decision to either cancel the trip or continue with it based on this biased information.
Exotic Adventures Inc. is facing the dilemma of determining what would be the most cost effective alternative, to either cancel the trip to Iquitos or to continue with it.
1. Should Exotic Adventures Inc. cancel the Amazon Voyage to take place in October 1998?
Exotic Adventures should not cancel the voyage to the Amazon because based on the analysis made; the costs for continuing with the trip are lower than canceling it and also probabilities of getting to the final destination are high enough to make the risk worth it. [pic]
|Sensitivity Data |
| |Input |Output |
| |Value |Change (%) |Value |Change (%) |
|#1 | |-25.00% | |0.00% |
| |(230.00) | |(172.40) | |
|#2 | |-19.44% | |0.00% |
| |(219.78) | |(172.40) | |
|#3 | |-13.89% | |0.00% |
| |(209.56) | |(172.40)...