(Solution Download) Desicion analysis

ABC Enterprise Solutions, is the provider of hosted solutions for Small to Medium Enterprises


(SMEs). The headquarters is in Mississauga, ON, and has clients across the globe. Currently, they


are charging a $400 monthly fee for their CRM services they offer to 300 of their clients. They have


recently been contacted by their software vendor, and been told that with a $150,000 upgrade on their


hardware and CRM software platform, they can substantially improve their direct marketing


offerings. The new system will cost them nothing beyond the initial cost, but they will have to


increase the number of their maintenance and support staff from 10 to 13 to be able to comply with


their service level agreements. The maintenance staff is paid $1200 weekly.


Using the What-If Analysis feature of MS Excel, answer the following questions:


1. If the management thinks the upgrade will cause the demand (# of clients) to grow uniformly


(same percentage every month) until it doubles at the end of the third year (144 weeks), what


will be the average weekly demand growth (percentage) for their service?


(Note: assume 1 month is 4 weeks).


2. Assuming the demand growth from question 1 is achievable, should they invest in this


upgrade if they want to break even (reach the statuesque profit level) within 1 year? Why?


3. What minimum level of a weekly demand increase (percentage) would justify the investment


if ABC wants to break even (reach the statuesque profit level) after 2 years?


4. If the demand will stay the way it is, however there is an opportunity for ABC to charge more


for this new service, to maintain current profitability, what should the new monthly fee for


this service be


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