Case Study Assignment No. 1 Rob Richman, president of AmeriBank, takes off his g
ID: 356900 • Letter: C
Question
Case Study Assignment No. 1 Rob Richman, president of AmeriBank, takes off his glasses, rubs his eyes in exhaustion, and squints at the clock in his study. It reads 3 A.M. For the last several hours, Rob has been poring over AmeriBank's financial statements from the last three quarters of operation. AmeriBank, a medium-sized bank with branches throughout the United States, is headed for dire economic straits. The bank, which provides transaction, savings, and investment and loan services, has been experiencing a steady decline in its net income over the past year, and trends show that the decline will continue. The bank is simply losing customers to nonbank and foreign bank competitors AmeriBank is not alone in its struggle to stay out of the red. From his daily industry readings, Rob knows that many American banks have been suffering significant losses because of increasing competition from services typically in the domain of American bank bank competitors specialize in particular services, they are able to better capture the market for those services by offering less expensive, more efficient, more convenient services. For example, large corporations now turn to foreign banks and commercial paper offerings for loans, and afluent Americans now turn to money-market funds for investment. Banks face the daunting challenge of distinguishing themselves from nonbank and foreign bank competitors. nonbank and foreign bank competitors offering s. Because the nonbank and foreign Rob has concluded that one strategy for distinguishing AmeriBank from its competitors is to improve services that nonbank and foreign bank competitors do not readily provide: transaction services. He has decided that a more convenient transaction method must logically succeed the automatic teller machine, and he believes that electronic banking over the Internet allows this convenient transaction method. Over the Internet, customers are able to perform or at work. The explosion of the Internet means that many potential customers understand and use this resource. He therefore feels that if AmeriBank offers Web banking (as the practice of Internet banking is commonly called), the bank will attr many new customers. transactions on their desktop computers either at home Before Rob undertakes the project to make Web banking possible, hm to understand the market for WehExplanation / Answer
a)
Variables
P1 is the number of people in the age group of 18-25 in Silicon Valley.
P2 is the number of people in the age group of 26-40 in Silicon Valley.
P3 is the number of people in the age group of 41-50 in Silicon Valley.
P4 is the number of people in the age group of 51 and up in Silicon Valley.
P5 is the number of people in the age group of 18-25 in big cities.
P6 is the number of people in the age group of 26-40 in big cities.
P7 is the number of people in the age group of 41-50 in big cities.
P8 is the number of people in the age group of 51 and up in big cities.
P9 is the number of people in the age group of 18-25 in small towns.
P10 is the number of people in the age group of 26-40 in small towns.
P11 is the number of people in the age group of 41-50 in small towns.
P12 is the number of people in the age group of 51 and up in small towns.
Objective Function
Minimize:
Z=4.75*P1 + 6.50*P2 + 6.50*P3 + 5*P4 + 5.25*P5 + 5.75*P6 + 6.25*P7 + 6.25*P8 + 6.50*P9 + 7.50*P10 + 7.50*P11 + 7.25*P12
Constraints
18-25
25-40
41-50
51+
$4.75
$6.50
$6.50
$5.00
$5.25
$5.75
$6.25
$6.25
$6.50
$7.50
$7.50
$7.25
b) Given that the profit margin is 15%, Sophisticated Surveys will submit the following bid:
(4.75*600 + 6.5*0 + 6.5*0 + 5*300 + 5.25*0 + 5.75*550 + 6.25*150 + 6.25*0 + 6.50*250 + 7.50*0 + 7.50*150 + 7.25*0)*$1.15
($11199.5)*1.15 = $12879.4
c) After reviewing our first bid, Rob Richman indicated that he wanted at least fifty people from each age group and area to be surveyed. So we added more constraints to fit the needs of AmeriBank.
Additional constraints:
p1,p2,p3,p4,p5,p6,p7,p8,p9,p10,p11,p12 >=50
New bid will be
= (237.50+325+975+250+262.5+625+3125+1950+4500+375+362.5)1.15
= 14935.6 $
Region Age Groups18-25
25-40
41-50
51+
Silicon Valley$4.75
$6.50
$6.50
$5.00
Big cities$5.25
$5.75
$6.25
$6.25
Small towns$6.50
$7.50
$7.50
$7.25