Solved: Tidewater Services recently celebrated its 10th anniversary as a professional services

Tidewater Services recently celebrated its 10th anniversary as a professional services firm that handles investigations for law firms offering amenities, such as background checks, surveillance, interviewing of witnesses, crash scene investigation, and other related services.

The company was founded by Lee Herbert who had extensive experience working for companies that handle investigative work. Herbert is more of a people person and is always looking for the next new client to take on. Admittedly, Herbert had no experience in running a business when he decided to go out on his own and enlisted the help of his long time friend, Bradley Simmons.

Simmons has spent his career working for larger corporations in finance and had no experience in investigative services, but was looking for a change.

Over the 10 years since the company’s founding, Tidewater Services struggled at first but slowly grew over the last five years. The more law firms the company works with, the more cases they receive. The more cases they receive, the more hours they can bill. Tidewater currently has six investigators and two clerks in addition to Herbert and Simmons. Over the years, they have expanded and contracted based on the volume of business and the local economy.

Based in Norfolk, Virginia, Herbert is really interested in expanding the business to other major cities in the region, believing that “there are only so many law firms here in Norfolk.” He feels that if they’ve survived 10 years, then they should continue to focus on growing the business. Simmons, on the other hand, feels that expansion will put the company at risk as it takes time to develop a decent client base. They had opened a second office several years back across town but eventually closed it when it didn’t generate enough revenue to cover expenses. He’s worried the expansion may bankrupt the company.

Even though the two are business partners, Herbert is the president and Simmons the vice president. Herbert asked Simmons to evaluate several options to further expand the business. From Herbert’s perspective, he has concluded that three objectives are important in this decision. First, is to find a city with a large number of Fortune 500 companies, a cost of living comparable to Norfolk, and a city that is in a reasonable distance from Norfolk as he and Simmons would be spending a lot of time in the new office at first. Because both have families with young children, Herbert feels that the distance is twice as important as the other criteria.

Here is the summary of Simmons’ research.

I. Richmond, Virginia: Number of Fortune 500 Companies: 5; Cost of Living Comparison: 0.934 (less than Norfolk); Driving Distance: 81 miles

II. Charlotte, North Carolina: Number of Fortune 500 Companies: 7; Cost of Living Comparison: 0.834 (less than Norfolk); Driving Distance: 283 miles

III. Atlanta, Georgia: Number of Fortune 500 Companies: 10; Cost of Living Comparison: 0.854 (less than Norfolk); Driving Distance: 503 miles

Question 1. Define the decision problem and the general nature of the problem.

Question 2. What event triggered

Question 3. Are we imposing any implied constraints on the situation

Question 4. Define the objectives

Question 5. Identify the alternatives

Question 6. Compare and contrast the consequences for all three alternatives by the fundamental objectives. Rank each alternative using proportional scoring, include weights on the objectives. Are there any dominated alternatives that can be eliminated? Are there any even swaps.

Question 7. What decision-making styles are at work here? What is their attitude towards risk?

Question 8. Are there any biases in play here that may impact the effectiveness of the decision?

Question 9. What are the uncertainties for this decision situation? What are their consequences?

Question 10. Evaluate this decision situation using tradeoffs. What location should they select? Are there any linked decisions? Discuss any assumptions as needed.

Expert Answer

Answer 1: In this case, the decision problem is whether to expand the business to other major cities in the region or not. The nature of the problem is that expansion may bankrupt the company.

Answer 2: The event that triggered this situation was Herbert felt that there were few law firms in Norfolk. According to Herbert, if the company has survived for 10 years and the company should focus on growing the business.

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Answer 3: An implied constraint in this situation is that Herbert does not have any experience
in running a business while Simmons does not have any experience in investigative services.

Answer 4: There are 3 objectives:

To find a city with a large number of Fortune 500 companies
To find a city with a cost of living comparable to Norfolk
To find a city that is in a reasonable distance from Norfolk

Answer 5: There are 3 alternatives:

Expand the business to Richmond, Virginia having 5 Fortune 500 Companies with Cost of Living less than Norfolk and Driving Distance of 81 miles from Norfolk

Expand the business to Charlotte, North Carolina having 7 Fortune 500 Companies with Cost of Living less than Norfolk and Driving Distance of 283 miles from Norfolk

Expand the business to Atlanta, Georgia with 10 Fortune 500 Companies: 10 with Cost of Living less than Norfolk and Driving Distance of 503 miles from Norfolk

Answer 6: Criteria for evaluation –

Scoring Model (3-best, 2-second best, 1-worst)

Richmond
Number of companies – 1
Cost of living – 3
Distance – 1
Charlotte
Number of companies – 2
Cost of living – 1
Distance – 2
Atlanta
Number of companies – 3
Cost of living – 2
Distance – 3

Answer 7: Herbert’s decision-making styles include intuition and thinking that the company will
do better in another city. Simmons’ decision-making styles include sensing risk of bankruptcy because of his knowledge in financing. Herbert feels that risk would be minimal since the company has survived for the past 10 years. Simmons feels that this is a huge risk since this attempt has previously been made in the same city and it failed.

Answer 8: Herbert’s view is biased as he feels that his company can strive
wherever there are Fortune 500 companies since it has survived in Norfolk for the past 10 years. This bias could possibly put the company at risk of bankruptcy as he is not familiar with the financial aspect of the company.

Answer 9: If the decision is made to relocate, there is a possibility that cost of living would increase more than what was already set. This could result in decrease in revenue for Tidewater Services. Another uncertainty is that the Fortune 500 companies that were established could leave the city and this could result in decrease in revenue.

Answer 10: A trade-off for Tidewater will be to relocate the company to a city with a large
number of Fortune 500 companies instead of adding cost for the company. Tidewater
Services should select Richmond to move since they have the most Fortune
500 companies at the shortest distance. The gas saved due to the short distance
will make up for the cost of living in Richmond. The linked decisions will be to pick up
location for the company and hiring employees for the company.

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