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Exotic Adventures Inc

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Exotic Adventures Inc.
Case Synopsis
Exotic Adventures Inc. (EAI) is a travel company that offers voyages to the Arctic, Antarctica, islands in the South Pacific and Atlantic, and the Amazon River during the high water season. EAI has begun offering voyages to the Amazon River during the low water season due to a high interest by naturalists who think the voyage would be more interesting. EAI has become concerned with the depth of the water in the Amazon River during the low water season. The company has received conflicting information from Brazilian and Peruvian Pilots on the whether or not it is safe to maneuver through the river. (Shaw & Hulland, 1999)
State the Assignment Question
Should EAI cancel the voyages scheduled on October 8th or should they continue the voyages with the possibility of completing the voyage, cancelling the voyage at Manaus or turning back before Iquitos?
Case Analysis
EAI has to make a decision on whether to cancel their voyage through the Amazon river or to attempt to navigate through the river with a chance of having to cancel the trip early. Each of the options that EAI has poses a monetary loss in income to the company except for the decision of continuing through the river and completing the voyage. Canceling the trip or not completing the voyage at Iquitos not only poses a monetary loss for EAI, but also for Brazil and Peru. (Shaw & Hulland, 1999)
The agents in Brazil have advised EAI that their pilots will not take EAI’s ship past Manaus. They have stated that the water levels in the river are too low to navigate the ship all the way to Iquitos. On the other hand, the agents in Peru have advised EAI that the water levels in the river are safe enough for the ship to travel all the way to Iquitos and back. In both of these countries, tourism accounts for a great share of the national revenue. (Sinclair & Chandana, 2010) Both Brazil and Peru will benefit from EAI continuing their voyage down the Amazon River. (Shaw & Hulland, 1999)
Lower than normal water levels in the Amazon River are said to be caused by El Niño. El Niño causes irregularly warm weather from Pero and Equador to the central Pacific equator. ("El nino," 2010) In 1997 and 1998 temperatures were higher than normal due to El Niño. September saw the highest temperatures in the prior 50 years. ("El nino," 2010) If water levels continue to drop, EAI will not be able to complete their voyage to Iquitos and will have to cancel their trip short. (Shaw & Hulland, 1999)
Data Analysis to Support Decision
Exotic Adventures Decision Tree • EAI has to decide whether or not to cancel the trip to Iquitos.
• If EAI cancels the trip, they will incur a cost of $184,000.
• If EAI does not cancel the trip they will either have to cancel the trip at Manaus, turn around before Iquitos or there is a chance that they can complete the trip.
• There is a 20% chance that EAI will have to cancel the trip once they reach Manaus. If they cancel at Manaus, EAI will incur a cost of $282,000. If EAI decides to continue the trip, they have an 80% chance to reach Iquitos and complete the trip.
• If EAI continues to Iquitos, they have a 50% chance that they will have to turn around prior to reaching Iquitos. If EAI makes this decision, they will incur a cost of $290,000. At this point, EAI also has a 50% chance of completing the voyage.
• If EAI completes the voyage, they will make a profit of $396,000.
Exotic Adventures Optimal Decision The Precision tree software lists this decision as the optimal decision for EAI. According to the case and to the software, EAI has an 80% chance to complete the trip and gain the maximum profit of $396,000.
What Happened EAI has to decide whether to cancel the voyage to Iquitos or to continue the voyage with the chance of not being able to complete it. If EAI cancels the voyage they will lose $184,000. If EAI decides not to cancel the trip but are not able to complete it, they will also lose income. The only way to gain a profit would be for EAI to complete the voyage to Iquitos. According to the decision tree, the only option that EAI should consider is to try to complete the entire voyage. The only way to maximize profit is by completing the voyage. EAI should not cancel the voyage and should attempt to complete the entire trip.

References
Shaw, P., & Hulland, J. S. (1999). Exotic adventures inc.: The amazon river voyage. Richard Ivey School Of Business
Sinclair, D., & Chandana, J. (2010). Tourism in the amazon: identifying challenges and finding solutions. Worldwide Hospitality and Tourism Themes, Retrieved from http://search.proquest.com.ezproxylocal.library.nova.edu/pqcentral/docview/356965612/13274A1D8026CFEBCA5/7?accountid=6579
El nino. (2010, April 19). Retrieved from http://www.oar.noaa.gov/k12/html/elnino2.html

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