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Transcript of APPSHOP
A client has required Appshop services to do all the consulting for the OS-7 Project, once Appshop had given its proposal, the client asked for a lower price giving
or the possibility of producing a
Request for Proposal
for all competitors.
It´s all about service
Conclusions and Recommendations
$175.000 a month
Alternative 1 ------- $155.000
Alternative 2 --------$ 125.000 plus
$ 1.5 million bonus
Request of Proposal
$ 150.000 with share of savings
After conducting a detailed calculation of the alternatives, the one that offers the best present value for Appshop, is the Request of Proposal. Therefore, we recommend to not accept the current pricing offers.
Even though, current clients proposals offer direct contract to Appshop, the payments in those alternatives do not look atractive due to the low contribution margins, considering the stimated project cost of $ 140.000 a month.
Even though, there is not 100% certainty of wining the bid, the best option for Appshop is to wait for the request of Proposal process given the high bonuses expectations involved.
This calculation was possible due to the Appshop estimates of the probability of the different scenarios. Therefore, we strongly recommend the company to continue collecting its clients and project data in order to enrich its probability estimates for furure decisions.
Appshop,Inc.It´s all about service,UVA-QA-0618 (2003)
Modeling Business Decision Course Number TOMS 5301 Uma Kumar Carleton University. (VitalSource Bookshelf Online). Retrieved from Https://bookshelf.vialsource.com/#/books/9781121035850/
Petty, N.W.,& Dye, S.(2013). Triangular Distributions. Retrieved from StatsLC.com
Possible Outputs of the bidding process
Probability is the area under the curve for each scenario:
We built a decision tree to evaluate the economic benefit of choosing one of the three alternatives we have after the client had refused the original proposal and its chance of occurrence.
Added to this, since the payment differs in mode, we had to use the Net present Value (NPV) to compare objectively the value of each option.
Finally, we used a triangular distribution model to find the probabilities of occurrence of the share of savings in the RFP.