Calculator Allowed: No
Transcription of this question: 5.The group are considering two target markets.Option 1: enter the Asian marketEmma strongly prefers this option. She recently presented IBAT at a medical conferencein Asia. Great interest was shown and some attendees wanted to purchase samples atthe conference. However, sales in Asia are not possible, because IBAT has not yet metregulatory quality standards there.Falit also prefers this option because significant economies of scale could be gained. Healso fears that other businesses will launch a similar product in Asia. The costs of enteringthe market would be relatively small for Medimatters. A suitable medical equipmentwholesaler who could market and distribute the product operates in the region.Ahmed and Didi are concemed. Quality issues with the lens manufacturer in India areworrying and should be resolved. They would like market research to be conducted toassess the suitability of Asian, as well as European and American, markets.Option 2: continue to sell in BrazilDidi favours this option. Always cautious, he thinks that current difficulties should be resolvedbefore further expansion. He forecasts a reasonable first-year profit — far more than mostnew businesses. Ahmed likes the fact that he would not have to take on any additionalworkload or travel across the world: he is already struggling to manage his responsibilities.Carlo prefers this option because he wants to avoid the problems of growing too quickly,because many overambitious new businesses fail.In preparation for the next group meeting, a decision tree showing both options has beenproduced.Option 1$100000Option 2$10000Probabilitygreat success 0.1moderate success 0.5not successful 0.4reat success 0.3moderate success 0.6not successful 0.1Forecast revenue$600 000$200 000-$50 000$60 000$20 000-$10 000PredictedOptionoutcome$40 0002(Question 5 continued)Using the case study and the additional information on page 4, recommend whetherMedimatters should implement option 1 or option 2.You will find it useful to calculate the predicted outcome for option 2 in the decision tree onpage 4.