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The main stages of the analysis 343
lowest levels of benefits for that region (the North had only two available
strategies so the results for this region were not analyzed). When a
graph has a shape like that shown in Figures 13.6(a) or (b) the ‘middle’
strategy will never be recommended by the computer. The reasons for
this are analogous to those which led to the exclusion of packages 1 and
2 from the efficient frontier. This means that in the East the choice is
between the status quo and a major expansion to 10 outlets. The problem
is that this major expansion would cost an extra $38 million, and the
model suggests that this expenditure is not worthwhile given the limited
funds which are available. It can also be seen that the opening of three
town center sites in the South would actually lead to a loss of benefits,
despite an extra expenditure of $20 million. (Note that these graphs do
not take into account the different lengths of the regional benefit scales,
i.e. the within-criterion weights, so direct comparisons cannot be made
between them.)
The group were now seriously considering the B package, but the
facilitator suggested that they should first perform a sensitivity analysis
before making a final decision.
Sensitivity analysis
The group’s proposed package had been based on the assumption
that funds of about $70–80 million would be available to finance the
company’s strategies. Because there was some uncertainty about how
much money would actually be available, the group felt that it might be
worth identifying the best packages if the company had more funds at
its disposal. For example, it might be that an argument could be made
for extra money if it could be shown that this would lead to a package
with substantially increased benefits.
The EQUITY package enables the user to explore the packages on the
efficient frontier curve. Clearly, if more money is available then this will
involve a move along the curve to the right. EQUITY showed that the
next package on the curve involved the same strategies as the B package,
with the exception that in the East region an expansion to 10 outlets
would be recommended. This would lead to the maximum possible
value of benefits of 100, but would involve expenditure of $109 million.
The group agreed that this level of expenditure would not be feasible
and, anyway, the relatively small improvement in benefits over the B
package would not have justified the increased costs, even if such funds
were available.