Category Archives: Management Science

Solution to Management Science Series #209: Mysterious Disease in a Tropical Island: Data Analytics & Medicine

Mysterious Disease in a Tropical Island: Data Analytics & Medicine

23% of males in the tropical island, Cappytopa, are known to carry a mysterious disease called ‘Dinosaur flu’.

A newly developed test correctly detects dinosaur flu 90% of the time for males, but incorrectly detects dinosaur flu in non-infected males 35% of the time (false positive).

1.A randomly selected male is tested for the dinosaur flu and the result is positive. What is the probability that this male is dinosaur flu positive?

2.What is the probability that this same male is dinosaur flu negative?

3.What is the probability that a randomly selected male has a positive test? Would you trust in this test?

Solution to Management Science Series #208: Zodd Japanese Manga trying to improve customer satisfaction

Selim Hasagasioglu Academy and Consulting Services was contacted by a very niche e-commerce platform called Zodd that markets and sells Japanese manga and relevant merchandise.

Zodd has been recently struggling with customer satisfaction issues. Furthermore, Zodd does not have the information on the historical customer satisfaction levels.

Selim’s firm carried out a survey, randomly sampling 50 customers out of the firm’s 1300 customers. The number of customers in the sample who claimed that they were ‘entirely satisfied’ was 35.

a) Do you need to use the finite population correction factor?

b) What is the sample proportion for the sample collected by Selim’s firm?

c)Is the distribution of the sample proportion normal or can it be used to conduct a confidence interval analysis?

d) What is the margin of error assuming a 95% confidence level?

e) What is the 95% confidence interval for the proportion of customers who are “entirely satisfied”? What is the 99% confidence interval? Are you 95% confident that customers are more than likely to be entirely satisfied with Zodd? Are you 99% confident that customers are more than likely to be entirely satisfied with Zodd?

f) How many customers should be sampled to ensure a margin of error of 0.12 with a 90% confidence level if you use p* = 0.5?

g) How many customers should be sampled to ensure a margin of error of 0.12 with a 90% confidence level if you use p* = 0.75?

h) Between the answers to f) and g), which is a more conservative approach and why is this difference important in the practice of data/business analytics?

On Management Consulting Practices: Turnaround Projects followed by Business Transformation, Brand Revitalization, and Sustainable Growth. Focusing on Lego, Nintendo, and Sega

Studying successful turnaround projects will provide you with great lessons.

Many consultants tasked with turning around a business focus mainly on cost reduction projects and deem the mission complete after a successful turnaround.

However, natural and subsequent steps after a turnaround are business transformation and brand revitalization.

Business may have survived after the turnaround but whether it will reach a sustainable and organic growth phase ever again depends on following transformation and revitalization.
In this article, I elaborate on what needs to follow after a turnaround project for a business to continue to thrive in the future. I share how successful business transformation and brand revitalization look like, analyzing the history of Lego, Nintendo, and Sega in greater detail.

Solution to Management Science Series #207: Marketing real-world example ‘Crenner Toys designing a promotion’

Marketing real-world example: Crenner Toys designing a promotion

Crenner Toys, famous for its toy vehicles transforming into attack vehicles and sold with complementary figures, is planning to roll out a promotion through which Crenner will send discount codes to its existing customers via emails.

Crenner will deem this promotion viable and subsequently implement it at national scale only if more than 15% of customers receiving the codes use them within 10 days. To assess the viability of this promotion, Crenner sent codes to a random sample of 150 customers and 23 of those receiving the code used it.

1.Construct the Null and Alternative hypotheses.

2.Should Crenner launch this promotion at national scale? Crenner believes that a significance level of 5% is appropriate for the hypothesis testing.

Solution to Management Science Series #206: Hanagawa’s Mailing Campaign

Producer of high-quality plastic model kits, Hanagawa, strategized a mailing campaign. Hanagawa will send informational and promotional emails to its customers. Through pilot tests, Hanagawa found out that 15% of these emails are considered spam by the customers’ emailing services.

Hanagawa knows that each such email goes through a spam filter and only if the filter clears the email, it goes to the inbox of the customers. Otherwise, it will wind up in the customer’s Spam folder. Hanagawa estimates that 45% of the spam messages and 95% of non-spam messages end up in customers’ inboxes.

1.What is the probability that the next email sent by Hanagawa winds up in a customer’s inbox?

2.What is the probability that Hanagawa’s next email is spam and ends up in a customer’s inbox?

3.What is the probability that Hanagawa’s next email is labelled as either spam or ends up in a customer’s inbox?

4.Suppose the next email sent by Hanagawa is labelled as spam. What is the probability that it ends up in a customer’s spam folder?

5.Suppose the next email sent by Hanagawa goes to a customer’s Spam folder. What is the probability that it is spam?

Solution to Management Science Series #205: Arkham high-end action figures (Pricing real-world example)

Arkham is a prominent action figure manufacturer known for its high-quality action figures and playsets commanding higher prices than is usual in this particular market.

Arkham is considering launching a new brand of action figures called BATS. The marketing department of Arkham is required to come up with an estimate of the average preferred price within the entire action figure market to price this brand new line viably.

The marketers randomly sampled 50 people in the action figure market. The population, i.e. the entire action figure market, is large enough and the finite population correction factor can be ignored. The standard deviation of the preferred price within the entire action figure market is estimated to be $200 (valid for questions from 1 to 6 below).

1. What is the distribution of sample means? Explain your rationale.
2. Are you required to know the distribution for the entire action figure market?
3. What is the expected value of x ̅ (x bar)?
4. Calculate the standard deviation of x ̅ (x bar).
5. The average preferred price for the sample you collected was $750. Construct the 95% confidence interval for the average preferred price for people in the entire action figure market. Similarly construct the 99% confidence interval. Why is one confidence interval bigger than the other?
6. Instead of a sample size of 50 people, you randomly sampled 130 people and the average preferred price of this sample stayed constant at $750. Construct the 95% and the 99% confidence intervals for the preferred price for people in the entire action figure market.

Now, for the questions asked below, assume that you do not know the standard deviation of the preferred price for people in the entire action figure market. The average preferred price for the sample collected remains to be the same at $750 and the standard deviation for this same sample is $200. The sample size is 50 people.

7. Estimate the distribution of the sample means.
8. Estimate the standard deviation of the preferred price for people in the entire action figure market.
9. Calculate the standard deviation of x ̅ (x bar).
10. Construct the 95% confidence interval for the average preferred price for people in the entire action figure market. Similarly construct the 99% confidence interval. Compare your findings here with those you calculated in question 5.
11. Instead of a sample size of 50 people, you randomly sampled 130 people and the average preferred price of this sample stayed constant at $750 and the standard deviation of this sample remains to be the same at $200. Construct the 95% and the 99% confidence intervals for the preferred price for people in the entire action figure market. Compare these values with those that were found in question 6.

On outdated measures concerning how big a country’s economy is and what this means for your purchasing power, i.e. your salary or income

Many national income measurement methods of today are misleading and hardly reflect the realities of the state of a national economy. 🧭

Quoting from Michal Hudson’s “The Bubble & Beyond”

“By rejecting the classical distinction between productive and unproductive labor and credit, today’s national income accounts classify rentier gains as “earnings” on a par with wages and profits, adding to national product rather than simply being transfer payments.

This approach treats all wealth as being earned as part of the production process, not extracted from the economy in the form of a free lunch (“economic rent”) by rentiers. ”

In this article, I will investigate why current measures related to how big the economies of countries are trick many. Although many countries tend to jack up their GDP evaluations by using favorable methods, the reality for the average citizen is generally fundamentally different from what all these numbers tell. I will also share some other measures that will be more helpful for citizens in gauging their purchasing power, together with some additional considerations assisting them in making more informed decisions informed decisions.

Solution to Management Science Series #204: Data Analytics and Forensics: Coroner’s Inquest

Data Analytics and Forensics: Coroner’s Inquest

Given the family’s demographics, the probability that the family’s first child dies of SIDS is 1 out of 1300.

Considering all other factors such as the mental state of the family and the neighborhood the family lives in, the probability that the first child is murdered is 1 out of 21,700.

Unfortunately, the family’s second child also died after 18 months had passed since first child’s death. The probability that second child dies of SIDS given that first child already died of SIDS is 1 out of 130. Furthermore, the probability that second child is murdered given that the first child was murdered is 176 out of 21,700.

A coroner assigned to this case is investigating how this could happen. The first thing she wants to look at is the probability that both first child and the second child die of SIDS given the subsequent deaths of two children. Help the coroner find out this probability.

Solution to Management Science Series #203: Real-world business problems: Improving the Customer Service at Hanamichi Sushi Restaurant

You opened the first sushi restaurant in Konoha, Hanamichi Robot Sushi, which is fully operated by robots.

The time to serve a customer is normally distributed with a mean of 8 minutes and a standard deviation of 2 minutes.

1.Find the probability that it takes 8 minutes or less to serve the next customer.

2.Find the probability that it takes 10 minutes or more to serve the next customer.

3.Find the probability that it takes 6 minutes or less to serve the next customer.

4.Do your answers to 2 and 3 resemble or differ from each other? Compare your answers.

As the owner of Hanamichi, you plan to conduct a customer survey. You will talk to 10 customers randomly entering the restaurant and try to determine how satisfied they are with your restaurant. You estimate this measure to have a binomial distribution and the probability that a guest will be satisfied is 85%.

5. Calculate the probability of the number of successes, i.e. the number of guests that will inform you that they are satisfied and create a plot demonstrating these probabilities.

6. What is the probability that 8 or more of the 10 guests with whom you speak will be satisfied?

7. What is the probability that fewer than 8 of the 10 guests with whom you speak will be satisfied?

Retirement, Financial Independence, and Withdrawal Rates 💸

Can a portfolio containing bonds increase the success rate of an orderly retirement?

What is the required withdrawal rate for such a portfolio to succeed?

As riskier securities, stocks may provide more returns and higher sustainable withdrawal rates, however at what cost, i.e. risk?

What may be the composition of a portfolio that would allow you to withdraw at 4% annually, $3500 each month for the next 20 years?

As assets that are more dependent on the current fiat currency rules continue to struggle, the success rate of such portfolios will dwindle.
In this article, I expand on how retirement funds are constructed and why many of them will fail eventually given today’s gloomy conditions while also answering each question mentioned above. In addition, I will also share my thoughts on what I myself do to survive and explain the illusion of measuring your returns in terms of just percentages and fiat currencies.