For Ann Harris

Christopher Mihun

Risk Assessment in Decision Making

PM640-1704A-01

Dr. Michael Hitson

Question 1

Jim is about to purchase a piece of office equipment at the local store. He then realizes that another store sells the same equipment for $1,024.99 while he had planned on spending $1,050.95 for the same equipment at the local store. Based on the situation, it is not advisable for Jim to go and buy the office equipment from the other side of the town. This is because, if he chooses to travel to the other side of the town, he will incur extra charges of fuel and labor that will add up to more than the cost that he will be avoiding. The difference in the costs is only $25.96, which does not justify the reason for Jim to go to the other side of the town since the fuel and labor costs will be more than $25.96. Therefore, the total cost for buying the office equipment will be more than the cost that he would have incurred in buying the office equipment at the local store. The risk of buying the equipment at the other side of the two is high considering that the equipment might break or even get stolen before they get to their destination(Mitchell & Harris, 2015).

Question 2

Jim is about to purchase office equipment at the local store for $19.95. He receives news that the same item is being sold at the other side of the town for $9.95. Jim should go to the store at the other side of the town. The difference between the prices is high, which means that Jim can consider buying the equipment from the other side of the town. The price of the equipment also indicates that the equipment is not large in size, which means that Jim can walk to the store across the town. This indicates that Jim won’t have to incur expenses associated with the transport or labor. When buying at the store across the town, the level of risk is low and the matches with the difference in the prices of the item to be bought. Therefore, Jim can consider taking the risk of buying the equipment from the other store selling at a lower price as compared to the local store selling the equipment at a much higher price (Mitchell & Harris, 2015).

The answers for the above questions would change if all the stores were online. In the first question, the difference in the prices is $25.96 but it is a considerable amount when the risks are low. If the store across town was online, Jim would have considered buying the equipment from the store. Since the equipment will be delivered to his doorstep, the risks of breakage and costs associated with fuel and labor will have been reduced. Therefore, Jim would have considered buying the equipment from the store across town. In the second question, Jim would also have considered buying the equipment from the online store selling the equipment at a lower price. With the risks being low and the prices being low, the online store offering similar equipment at a much lower price would be the option. Online stores have been effective in the past few years and have proved to be reliable and consistent, aspects that have improved the retail experience between the buyers and sellers (Novak, Hoffman, & Yung, 2010).

References

Mitchell, V. W., & Harris, G. (2015). The importance of consumers' perceived risk in retail strategy. European Journal of marketing, 39(7/8), 821-837.

Novak, T. P., Hoffman, D. L., & Yung, Y. F. (2010).Measuring the customer experience in online environments: A structural modeling approach.Marketing science, 19(1), 22-42.