As outlined above (in the image), 3DR needs to make a decision whether to create in-house capacity or outsource their need for a new marketing team member so they can improve their social media engagement efforts to maintain and/or grow their following. The situation stands, 3DR needs to expand their operations in the marketing department and market research indicates that there’s a .20% chance customer demand increases during expansion efforts, a .60% chance that it will remain stable, and a .10% it will decrease. According to 3DR leaders, it’s predicted that if they create in-house capacity and the customer demand increases then they will profit around $200,000 (USD). They also predict that if the customer demand remains stable they will likely profit $50,000 and potentially lose $100,000 if it decreases during expansion efforts over the next 12-months. On the contrary, 3DR predicts that if they decide to outsource the marketing team position that they would stand to profit $10,000 regardless of the customer demand.
According to Black (2020), decisions trees are often depicted with decision nodes and projected outcomes. Leaders can identify which COA to use based on a variety of decisions that can be made using this concept. But since the events indicated by outcome nodes are speculative in nature, chance nodes also specify the probability of a specific projection coming to fruition.
Expected Monetary Value (EMV)
If 3DR was looking at increasing in-house capacity, the EMV would be:
For outsourcing and leveraging the network’s capacity, the EMV would be:
As shown, increasing in-house capacity may be the best COA for 3DR because forecasts project profits estimated at $60,000 compared to $9,000 profits if 3DR decided to outsource and leverage their network’s capacity.
For risk avoidance, it would be wise for 3DR to create in-house capacity to grow an organic marketing team in order to reach target customers.