Simulation Memo

Simulation Memo

Probability is used in virtually every aspect of business today. More specifically, businesses all across America are confronted with a variety of situations in which critical decisions or recommendations must to be made based on previous events that have taken place. The ability to make the most accurate and effective decision and or recommendations, requires the foreknowledge of the likely hood or possibility of a certain result or outcome. Hence the theory of probability will help determine the possible outcomes based on previous events. The simulation illustrates how probability distribution and the central limits theorem can by applied in real world business research.

For Aquine, a mechanical watch manufacturer company, market share is at an all time low. According to research conducted by the company, there are two main factors as to why the company’s sales have dropped. Some within the company believe that the watches are not being advertised effectively. Others believe that the overall quality of the watches is the reason for the decline in sales. Therefore, in an effort to verify either of these opinions to be true, data was collected. Because the notion that the quality of the watches were responsible for declining sales, it was necessary to find out the perception about chronometers and the mechanical watch industry data. Research indicates that consumers value certified watches. The data also revealed that of the 37,500 watches sent for certification; over 25,000 were rejected this year. In addition, data for consumer and trade responses confirmed that Aquine’s marketing strategy is effective, as it has compelled more people to purchase an Aquine chronometer.

As a result of more than 60 percent of all Aquine failing certification testing, it was crucial to determine what sample size to collect data to represent the behavior of the entire watch population. By applying the central limit theorem, it can be concluded that the...