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You are an economist for a U.S. Manufacturer, who is considering expanding sales into Europe
You are an economist for a U.S. Manufacturer, who is considering expanding sales into Europe. Your market research has identified the market potential in France, Italy, and Spain as described next:
Success Level France Italy Spain
Probability Units Probability Units Probability Units
Big 0.3 1,000,000 0.4 900,000 0.4 700,000
Mediocre 0.3 600,000 0.4 700,000 0.3 300,000
Failure 0.4 0 0.2 0 0.3 0
The product sells for $12 and has unit costs of $10.
If you can enter only one market, and the cost of entering the market (regardless of which market you select) is $300,000, should you enter one of these markets? If so, which one? If you enter, what is your expected profit?