SnackChips in China Case Solution

1. Ms. Caldwell has turned to you to analyze her strategic options with regards to whether to simply follow the "usual" 10-year expansion plan or to augment it with a "targeted" campaign for Shanghai. She notes that ConF will have to decide whether to remain in the Chinese market without knowing whether SFI's approach will be "aggressive" or the "usual" during the 2005 to 2008 period (but after seeing whether SFI augments its usual campaign in the 2002-2004 period); analogously, SFI will have to decide whether to be "aggressive" or take the "usual" approach in the 2005 to 2008 period without knowing whether ConF will stay in the market. What will you suggest is the optimal strategy to Ms. Caldwell? Be sure to lay out your case in terms of both your economic and game-theoretic analysis.

Since, the payoff in period 1 will be determined by the highest NPV obtained. Since, taking a “targeted” campaign will result in higher NPV under all Scenarios. For example, in period 1 regardless of CoNF’s entry, the company can have NPV of $217.12M while without it the NPV is $196M. Although, the difference is lower than the targeted ad-campaign expense of $25M however taking into account the present value of ad-expense the benefit may exceed the expense. In this regards, targeted ad campaign is beneficial for company under each scenario regardless of CoNF’s entry and aggressive strategy in period 2. The optimal strategy in period 2 may be selected by finding the Nash-Equilibrium.