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DARDEN SCHOOL OF BUSINESS
CASE STUDIES
The following case studies were constructed as exercises for Monte
Carlo simulation. Most do not include spreadsheets or instructions
specifically for Crystal Ball, but the terminology and teaching
notes help to quickly adapt the case for Crystal Ball. "TN"
denotes a teaching note file. Most cases cost less than $3 for a
single copy.
One of the authors of many of these cases is Samuel E. Bodily,
a member of our online Consultants' Corner (click
here to read more about Dr. Bodily).
> Calambra Olive Oil
> Cyberlab: A New Business Opportunity for Prico
> Entel Privitization: Telephonica De Argentina
Public Offering
> Genzyme/Geltex Pharmaceuticals Joint Venture
> John Denison (Private Investment Decision)
> On-line Auctions and Pricing Exercises
> Piedmont Airlines: Discount Seat Allocation
> Ponca City Cogeneration Plant
> Stars and Stripes: Quest to Bring Home America's
Cup
> Three Simulation Problems
You Can Use at Home
Calambra Olive Oil
By Dana R. Clyman and Phillip E. Pfeifer
Frank Lockfeld, president and founder of Calambra Olive Oil, must
decide how many gallons of oil to buy for the 1994 vintage year
even though the first-year marketing experiment for his fledgling
business has barely begun. This case describes the history of the
company and the current situation, including Lockfeld's assessments
of landing Neiman Marcus and Williams-Sonoma catalog sales, of 1993
retail sales through specialty shops, and of 1994 retail sales,
which are tied to the 1993 outcome. This case comes in five files,
with B and C added as adaptations for Monte Carlo simulation.
Files:
UVA-QA-0440: CALAMBRA OLIVE OIL (A)
UVA-QA-0442: CALAMBRA OLIVE OIL (B)
UVA-S-QA-0442: CALAMBRA OLIVE OIL (B)
UVA-QA-0551: CALAMBRA OLIVE OIL (C)
UVA-QA-0440TN: CALAMBRA OLIVE OIL (A), (B), (C)
To read more about these files and purchase them, visit
the Darden School Case Search Form and enter the case number or
keyword.
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Cyberlab: A New Business Opportunity for
Prico
By Larry Weatherford and Samuel E. Bodily
The president of a large and established manufacturer of laboratory
equipment has to decide whether to invest a million dollars for
30% equity in a start-up company in the field of lab robotics. The
agreement would also allow his company the right to market the product.
He already has a spreadsheet that projects the best guess of the
future scenario and calculates several measures of performance (ROS,
ROE, ROI, NPV, and IRR). He must decide which of the criteria are
most useful.
A relevant-cost issue that is introduced must be resolved, because
it makes a big difference in the NPV. In the supplement, some background
material is provided for a forecasting/judgmental assessment exercise
based on this decision. The supplement could, assuming students
have already been introduced to this topic, form the basis for a
short workshop (an hour or less) on judgmental probability, or it
could be used with a note on cumulative probability distributions
for an introductory class on the topic.
Files:
UVA-QA-0382: CYBERLAB: A NEW BUSINESS OPPORTUNITY FOR PRICO (A)
UVA-QA-0383: CYBERLAB: A NEW BUSINESS OPPORTUNITY FOR PRICO (B)
UVA-QA-0384: CYBERLAB: A NEW BUSINESS OPPORTUNITY FOR PRICO (SUPPLEMENT)
UVA-QA-0382TN: CYBERLAB: A NEW BUSINESS OPPORTUNITY FOR PRICO (A)
UVA-QA-0383TN: CYBERLAB: A NEW BUSINESS OPPORTUNITY FOR PRICO (B)
UVA-QA-0384TN: CYBERLAB: A NEW BUSINESS OPPORTUNITY FOR PRICO (SUPPLEMENT)
To read more about these files and purchase them, visit
the Darden School Case Search Form and enter the case number or
keyword.
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Entel Privitization: Telephonica De Argentina
Public Offering
By Samuel E. Bodily and Cathy Lloyd
A public offering to complete the privatization of the Argentine
phone company is planned. The initial pro form analysis suggests
a negative net present value for the offering. The task is to check
the assumptions of the firstcut analysis and make more consistent
assumptions about Argentine and US inflation about the business
performance of the phone company. A risk analysis (using Monte Carlo
simulation, for example) is needed to capture the full range of
risks and rewards and determine what to bid for the company.
Files:
UVA-QA-0432: ENTEL PRIVATIZATION: TELEFONICA DE ARGENTINA PUBLIC
OFFERING
UVA-QA-0432TN: ENTEL PRIVATIZATION: TELEFONICA DE ARGENTINA PUBLIC
OFFERING (TN)
To read more about these files and purchase them, visit
the Darden School Case Search Form and enter the case number or
keyword.
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Genzyme/Geltex Pharmaceuticals Joint Venture
By Samuel E. Bodily, Robert F. Bruner, Pierre Jacquet
In March 1997, an executive vice president of Genzyme Corporation
must develop the terms by which this $518-billion (revenues) firm
will form a joint venture with a small biotechnology firm to make
and market a new drug.
The tasks for the decision maker are to estimate the enterprise
value of the new joint venture and to recommend how large an interest
to acquire in the venture, what price to pay for that interest,
and when. The case may be used to pursue some or all of the following
objectives: (1) exercising analytical techniques, (2) introducing
a framework for creating value and reducing risk, (3) exploring
the impact on value of a hidden option (staged investing), and (4)
visualizing risk and its implications.
Files:
UVA-F-1254: GENZYME/GELTEX PHARMACEUTICALS JOINT VENTURE
UVA-S-F-1254: GENZYME/GELTEX PHARMACEUTICALS JOINT VENTURE
UVA-F-1254TN: GENZYME/GELTEX PHARMACEUTICALS JOINT VENTURE (TN)
UVA-S-F-1254TN: GENZYME/GELTEX PHARMACEUTICALS JOINT VENTURE (TN)
To read more about these files and purchase them, visit
the Darden School Case Search Form and enter the case number or
keyword.
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John Denison (Private Investment Decision)
By Michael O'Donnell and Samuel E. Bodily
A private investor (disguised) using a risk-analysis simulation
program chooses whether to invest in a gas well or a real estate
opportunity. The uncertainties vary considerably in kind and in
time resolution.
Files:
UVA-QA-0199: JOHN DENISON
UVA-QA-0199TN: JOHN DENISON
To read more about these files and purchase them, visit
the Darden School Case Search Form and enter the case number or
keyword.
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On-line Auctions and Pricing Exercises
By Samuel E. Bodily
On-line auctions and name-your-price innovations are becoming increasingly
popular. Using the probability distribution of buyers' willingness-to-pay,
these exercises ask students to compare the potential revenue from
traditional, posted, fixed-price auctions; name-your-price auctions;
English, ascending, open-outcry auctions; and sealed-bid auctions.
Students must determine an appropriate fixed price. A simulation
model using Crystal Ball would be used to make the comparisons.
Rules about when to use each sales mechanism and some characteristics
of auctions are developed along the way.
Files:
UVA-QA-0552: ON-LINE AUCTIONS AND PRICING EXERCISES
To read more about these files and purchase them, visit
the Darden School Case Search Form and enter the case number or
keyword.
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Piedmont Airlines: Discount Seat Allocation
By Phillip E. Pfeifer (A) and Samuel E. Bodily (B)
The manager of the Revenue Enhancement Department of an airline
has to decide the optimal number of seats to reserve for discount
customers on a particular flight. Historical data are given, as
well as probability distributions of demand for both full and discount
fares, in order to help make the decision. In this B case, the initial
results from a Monte Carlo simulation seem to conflict with the
critical-fractile result discussed earlier in the case. The manager
must figure out why and then make a decision.
Files:
UVA-QA-0339: PIEDMONT AIRLINES: DISCOUNT SEAT ALLOCATION (A)
UVA-QA-0340: PIEDMONT AIRLINES: DISCOUNT SEAT ALLOCATION (B)
UVA-QA-0339TN: PIEDMONT AIRLINES: DISCOUNT-SEAT ALLOCATION (A) AND
(B)
To read more about these files and purchase them, visit
the Darden School Case Search Form and enter the case number or
keyword.
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Ponca City Cogeneration Plant
By Samuel E. Bodily
An electric utility faces the hard choice between losing their
third largest customer or building a cogeneration plant that is
very risky to them and appears to take value away from the firm.
Students first assess their strategic position and the magnitude
of the risk, in the process improving the assumptions of the discounted
cash flow spreadsheet model available to them. The task is then
to be shrewd and creative in reducing and managing the risk of the
project, which, after all, is manageable. The supplement provides
information on the various factors that contribute to the risk of
the project.
Files:
UVA-QA-0469: PONCA CITY COGENERATION PLANT
UVA-QA-0469TN: PONCA CITY COGENERATION PLANT
UVA-QA-0470: PONCA CITY COGENERATION PLANT SUPPLEMENT
UVA-QA-0470TN: PONCA CITY COGENERATION PLANT SUPPLEMENT
To read more about these files and purchase them, visit
the Darden School Case Search Form and enter the case number or
keyword.
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Stars and Stripes: Quest to Bring Home America's
Cup
By Dana R. Clyman and Drew Freides
Stars & Stripes analyzes the process of yacht design selection
that led to the Stars & Stripes team taking the America's Cup
back from Australia in 1987. Using this winning process the Stars
& Stripes team is now in the critical development stage of designing
its yacht for the upcoming America's Cup race in 2003 and must choose
its yacht design.
This case provides students a unique opportunity to use simulation
software in spreadsheet format to gain an understanding of probability
distributions and simulation technology in order to optimize solutions
for various scenarios. The two key components to the design program
are the Velocity Prediction Program (VPP) and the Race Modeling
Program (RMP). Data gleaned from the VPP predicting sailing performance
of various hull geometries is then combined with meteorological
and oceanographical data in the RMP to simulate actual racing conditions.
Design assessment can then be made in absolute terms and in terms
relative to other design candidates.
Files:
UVA-QA-0563TN-M: STARS AND STRIPES: QUEST TO BRING HOME AMERICA'S
CUP (v. 1.2) UVA-QA-0563M: STARS AND STRIPES: QUEST TO BRING HOME
AMERICA'S CUP (MEDIA)
To read more about these files and purchase them, visit
the Darden School Case Search Form and enter the case number or
keyword.
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Three Simulation Problems You Can Use at
Home
By Phillip E. Pfeifer
This problem set consists of three focused problems amenable to
risk analysis. For example, one of the problems is the classic news-vendor
problem. The problems all involve decision making under uncertainty
and will test the students' skill in (1) building a spreadsheet
model (perhaps informed by an influence diagram), (2) converting
the spreadsheet to a risk-analysis model, (3) evaluating the model
using simulation, (4) interpreting the results, and (5) conducting
meaningful sensitivity analysis.
Files:
UVA-QA-0477: THREE SIMULATION PROBLEMS YOU CAN USE AT HOME
To read more about these files and purchase them, visit
the Darden School Case Search Form and enter the case number or
keyword.
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