Business Case Studies & Business Publications

SnackChips in China

Bodily, Samuel E.,...

Case

SnackChips in China

Bodily, Samuel E.; Lichtendahl, Kenneth C. Jr.; Clemen, Robert

QA-0698 | Published April 8, 2007 | 6 pages Case

Collection: Darden School of Business

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This case is intended to work well as an exam or a capstone for a course on decision analysis, simulation, real options, and game theory. It explores a conventional snack-chip marketer's strategy in China for promoting and advertising a recently acquired healthy snack-chip brand in mid-2002. The marketer has some key decisions to make, now and in the future, about a range of marketing expenditures in the context of an exciting emerging market and in the face of a formidable competitive threat from its chief rival. The case allows students to consider how two parties' decisions about marketing expenditures and market entry interact and to extend the notion of a single party's downstream decision (or real option) to multiple parties' "interactive" real options. The case's competitive situation can be modeled as a dynamic game of imperfect information, or a multiperiod decision situation with continuous uncertainties and a strategic interaction embedded downstream. Monte Carlo simulation of both parties' payoffs under equilibrium play in the downstream subgame yields a subgame perfect Nash equilibrium, which entails “interactive” threshold policies for both parties.