## Solution for Managerial Economics 4th Edition Chapter 17, Problem 1

by Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
147 Solutions 23 Chapters 104020 Studied ISBN: 9781305259331 5 (1)

# Chapter 17, Problem 1 : 17-1 Global Expansion You’re the manager...

## 17-1 Global Expansion

You’re the manager of global opportunities for a U.S. Manufacturer, who is considering expanding sales into Asia. Your market research has identified the market potential in Malaysia, Philippines, and Singapore as described next:

Success LevelMalaysiaPhilippinesSingapore

ProbabilityUnitsProbabilityUnitsProbabilityUnits

Big0.31,200,0000.31,000,0000.7700,000

Mediocre0.3600,0000.5320,0000.2400,000

Failure0.400.200.10

The product sells for \$10 and has unit costs of \$8.

If you can enter only one market, and the cost of entering the market (regardless of which market you select) is \$250,000, should you enter one of these markets? If so, which one? If you enter, what is your expected profit?

## 17-1

Yes, you should enter.  The market you should enter is Singapore.  The expected profit is \$890,000.

Malaysia: Expected unit sales = 0.3*1,200,000+0.3*600,000+0.4*0 = 540,000

Philippines: Expected unit sales = 0.3*1,000,000+0.5*320,000+0.2*0 = 460,000

Singapore: Expected unit sales = 0.7*700,000+0.2*400,000+01*0 = 570,000

Expected profit of entering Singapore: 570,000*(\$10-\$8) - \$250,000 = \$890,000