Decision Making and Problem Solving / MGT312

‫المملكة العربية السعودية‬
‫وزارة التعليم‬
‫الجامعة السعودية اإللكترونية‬

Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University

College of Administrative and Financial Sciences

Assignment 1
Decision Making and Problem Solving (MGT 312)
Due Date: End of Week 5, 4-10-2025
Course Name: Decision Making and Problem Student’s Name:
Solving
Course Code: MGT312
Student’s ID Number:
Semester: First

CRN: 15781
Academic Year:2025-26; FIRST SEMESTER

For Instructor’s Use only
Instructor’s Name: Dr. Faisal Alhathal
Students’ Grade:
/ 10

Level of Marks: High/Middle/Low

General Instructions – PLEASE READ THEM CAREFULLY
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The Assignment must be submitted on Blackboard (WORD format only) via allocated
folder.
Assignments submitted through email will not be accepted.
Students are advised to make their work clear and well presented; marks may be reduced
for poor presentation. This includes filling your information on the cover page.
Students must mention question number clearly in their answer.
Late submission will NOT be accepted.
Avoid plagiarism, the work should be in your own words, copying from students or other
resources without proper referencing will result in ZERO marks. No exceptions.
All answered must be typed using Times New Roman (size 12, double-spaced) font. No
pictures containing text will be accepted and will be considered plagiarism).
Submissions without this cover page will NOT be accepted.

Course Learning Outcomes-Covered
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Demonstrate a solid understanding of decision-making process for complex issues
pertaining to business environment both internally and externally. (1.2)

•

Explain critical thinking and cognitive psychology as it pertains to analyze and
synthesize information for problem solving and decision making. (2.7)

•

Identify and analyze different perspectives on understanding problems for different
situations. (3.1)

Assignment Instructions:
• Log in to Saudi Digital Library (SDL) via University’s website
• On first page of SDL, choose “English Databases”
• From the list find and click on EBSCO database.
• In the search bar of EBSCO find the following article:
Title:
Case Study: A Fast-Food Company Considers Dynamic Pricing
Author:
Elie Ofek
Date of Publication:
Sep/October2025
Published:
Harvard Business Review
Read the attached case study titled as “A Fast-Food Company Considers Dynamic
Pricing by Elie Ofek, published in Harvard Business Review, and answer the
following Questions:

Assignment Question(s):

(Marks 10)

Q1: Writ the problem statement about the above case. Problem statement should
include the followings: [500-600 words]
[Marks 5]
•

Briefly summarize the problem

•

Identify symptoms of the problem

•

Describe the size and scope of the problem

•

Identify the consequences

•

Explain any other research or investigation that you may pursue

Q2: Discuss the problem with 5-Why analysis. Draw and explain cause-and-effect
diagram based on the problem of the case? [200 words]
[Marks 3]
Q3. If you are consultant and asked to solve the problem, how will you solve the
problem of case? What are the steps you will follow to solve? [150 words]
[Marks 2]

Answers
Q1: Writ the problem statement about the above case. Problem statement should
include the followings: [500-600 words]
[Marks 5]
•

Briefly summarize the problem

•

Identify symptoms of the problem

•

Describe the size and scope of the problem

•

Identify the consequences

•

Explain any other research or investigation that you may pursue

ANSWER

Q2: Discuss the problem with 5-Why analysis. [100 words]

[Marks 1.5]

ANSWER

Q3. Draw and explain cause-and-effect diagram based on the problem of the case?
[100 words]
[Marks 1.5]

ANSWER

Q4. If you are consultant and asked to solve the problem, how will you solve the
problem of case? What are the steps you will follow to solve?
[Marks 2]
ANSWER

HBR’s fictionalized case studies present problems faced by
leaders in real companies and offer solutions from experts. This
one is based on the HBS case study “Dynamic Pricing at Wendy’s:
Where’s the Beef?” (case no. 525-010), by Elie Ofek, Alicia Dadlani,
and Martha Hostetter, which is available at HBR.org.

A Fast-Food
Company
Considers
Dynamic
Pricing
by Elie Ofek

140

Harvard Business Review
September–October 2025

M A RC US PATE L FE LT a mixture of pride
and unease as he stood at the head of
the conference table, waiting for his
leadership team to gather. Two years ago
he’d been recruited from Silicon Valley
to lead an ambitious digital transformation at Burger & Bites. Under his watch,
the once-traditional fast-food chain had
launched updatable menu screens in all
restaurants and a sophisticated mobile
app. But today, technology was not
his primary concern. Instead, Marcus
found himself grappling with something
neither his training nor his experience

had prepared him for: an unexpected
and volatile inflation crisis.
“Thanks, everyone,” Marcus began
as the team quieted down. “Laura, let’s
start with you. What are we looking at?”
Laura Ramirez, the Burger & Bites
CFO, displayed a slide of financial projections. “Input costs are accelerating far
faster than we anticipated,” she reported.
“Between the poultry and egg shortage
from the bird flu crisis and the most
recent tariffs, our margins are getting
tight. Only a few of our inputs come
from overseas—some of our beef is from

Illustrations by JORI BOLTON

“A more subtle strategy is shrinkflation: reduce portion sizes to mitigate costs. Making
patties slightly thinner or offering five fewer fries per serving could preserve margins.”
Australia and our avocados are from
Mexico—but they make up a big part of
our ingredient costs. And our domestic
suppliers are being squeezed on any­
thing they get from abroad, so they’ve
started to raise prices. In sum, the impact
is larger than you might think. We’ve
seen inflation in recent years, but noth­
ing like this.”
Marcus felt a knot in his stomach.
Despite his success in bringing Burger &
Bites into the digital age, he was already
under pressure from several major share­
holders to show clear paths to revenue
growth and margin improvement, some­
thing that seemed even more difficult
with this sudden increase in the compa­
ny’s cost of goods.
“Thank you, Laura,” he said, trying
to project calm. “I’ve asked Grace to
provide some suggestions for how we
might respond.”
Grace Zhang, the CMO, stepped in
smoothly. “In my last role I worked at
one of the Big Food giants, and we faced
similar pressures. There are several
strategies we can deploy quickly. First,
we can raise prices across the board. Our
new digital menus allow us to do that
immediately.”
She clicked through to the next slide.
“A more subtle strategy is shrinkflation:
reduce portion sizes to mitigate costs.
Even making burger patties slightly
thinner or offering five fewer fries per
serving could help preserve margins.
Along the same lines, we could use
lower-­cost ingredients instead of moreexpensive ones—dried parsley instead
of fresh in the coating for our Italian
chicken, for example. Customers might
notice, but if we do it correctly, the per­
ception of value remains stable.”

“Alternatively,” she continued, show­
ing another slide, “we can renegotiate
aggressively with suppliers. We have
leverage—Burger & Bites is a significant
customer for many of them.”
Grace turned to face the team.
“And the final option is overseas ex­pan­
sion. Increasing our international
foot­­print in Asia and Europe—by, say,
40%—could hedge against U.S. market
volatility and tariffs. That is obviously
a longer-term play.”
Marcus paused before saying any­
thing. Grace commanded the room
brilliantly, and he wanted to give her
presentation a second to resonate. “So,
does anyone have any thoughts?” he
finally asked.
“All these options have merit, but
we’re missing the obvious solution,”
said Jay Washington, the CTO, in his
typical brusque tone. Marcus had
brought in Jay to help oversee the digital
transformation. Like his boss, Jay was
an outsider from Silicon Valley; unlike
Marcus, he was comfortable delivering
direct criticism and openly attacking the
entrenched beliefs in the Burger & Bites
culture if he felt it was necessary.
“We need dynamic pricing,” Jay said.
“We invested in digital menu boards
precisely because of the flexibility they
provide. Sure, we can raise prices on
everything and pull them back when it
makes sense. But why not go further?
Adjust prices in real time based on fluc­
tuating input costs, demand patterns,
and other factors. That would capture
far more value.”
Marcus raised a hand to pause Jay,
his eyebrows knitted with concern.
Jay had been advocating for dynamic
pricing since the menu screen rollout.

His department—going well outside
its normal remit—had even calcu­
lated that it could increase profits by
at least 15%. But despite the pressure
from investors, Marcus had resisted,
choosing to ensure a smooth, glitchfree implementation before attempting
anything as bold as algorithm-driven
pricing. Beyond that, Marcus remained
deeply wary of consumer backlash.
Early in his career, his office in San
Francisco had been just blocks from
Uber’s headquarters when the compa­
ny’s infamous surge-pricing scandal
erupted in 2012—prices had spiked in
the New York City area as people tried
to flee Hurricane Sandy. People had
been angry about it for weeks, convinc­
ing Marcus that dynamic pricing could
easily alienate core customers.
“Thank you, Jay. We’ll consider
that as an option.” Marcus took a deep
breath, scanning the team. He was
reassured by the professionalism and
competence with which they were look­
ing to address the inflation crisis. But
he couldn’t shake a lingering anxiety.
The coming weeks would be crucial,
and decisions made now would shape
Burger & Bites for years to come.

DIVING DEEPER
Marcus settled into his chair, nodding to
the two experts he’d invited to brief him
on the promise and peril of dynamic
pricing. Opposite him sat Elena Shaw,
a seasoned consultant known for her
extensive experience with alternative
pricing models, and Dr. Amira Qureshi,
a technology ethicist and marketing
professor whose recent TED Talk had
made Marcus eager for her perspective.

Harvard Business Review
September–October 2025

141

“Dynamic pricing has proven incredibly effective across industries,” Elena
began. “Airlines, hotels, ride-hailing
services like Uber, even Disney theme
parks all adjust their prices to meet
demand. As a result, consumers have
grown accustomed to price fluctuations,
particularly during inflationary periods
like the current one. It was a stroke of
genius on your part, Marcus, to implement digital menus, which gives you
options now.”
Elena showed several optimistic
projections of how much extra margin
Burger & Bites could capture if it adjusted
its pricing based on regional demographics, time of day, inventory levels, and
even weather, for example by increasing
the cost of frozen desserts on hot days
and baked goods and coffee on cold ones.
Marcus shifted his attention to Amira,
sensing her reservations. “Dr. Qureshi,
your thoughts?”
Amira adjusted her glasses thoughtfully. “Marcus, while the potential benefits are appealing, dynamic pricing isn’t
without significant risks. Frequently
shifting the menu prices could unwittingly lead to discriminatory practices,
with certain groups of people being
inadvertently targeted for price changes
by the algorithm. Even if it’s unintended, the implications are serious.
And that’s not to mention the potential
backlash from customers.”
Marcus started to respond but was
interrupted by Elena. “Price discrimination already subtly exists within the

142

Harvard Business Review
September–October 2025

restaurant sector,” she said. “Consider
the airport locations Burger & Bites
has—prices there are routinely higher
due to captive audiences and greater
willingness to pay. We’re just considering the natural evolution of that, letting
Burger & Bites match pricing with market dynamics.”
“Respectfully, I think most consumers will balk at this kind of change,”
Amira countered, “especially at a time

when there’s so much anger over corporate profit-seeking. The backlash might
even come from unexpected quarters. Say you introduce an algorithm
that leads to higher pricing in affluent
neighborhoods at certain times, for
example. The right-wing media ecosystem could pick up on it as reverse discrimination. It could easily go viral.”
“Couldn’t we just apologize and
reverse course?” Marcus asked.

“Dynamic pricing is the future. It’s become the norm in other sectors. Customers will
adapt, adjusting their dining habits to places and times that fit their budgets.”
“These things are very hard to undo,”
Amira replied. “In 1999, Coca-Cola
floated the idea of vending machines
with thermometers that automatically
raised the price of soda on hot days. It
caused a scandal, the company quickly
walked it back, and by the end of the
year the CEO had resigned, with many
media outlets reporting that the gaffe
contributed to his departure. Or consider the outrage when the cost of Bruce
Springsteen tickets surged on Ticketmaster a few years back due to huge
demand. Public sensitivity to perceived
unfairness is acute, immediate, and
amplified by social media.”
“What do you think, Elena?” Marcus
asked.
“I don’t deny that backlashes can
happen,” she said. “But even in such
instances, companies have recovered well. Coca-Cola is still doing just
fine. Uber, airlines, and hotels are still
successful. You don’t need to go all in
immediately—you could pilot dynamic
pricing discreetly, perhaps through appbased changes that you don’t announce
while you fine-tune the system. Remember, younger consumers—Gen Zers
and Millennials especially—are digital
natives who are generally more accepting of this kind of flexibility.”
Marcus considered the idea before
turning again to Amira. “Would personalized, app-based dynamic pricing be a
safer initial approach?”
Her expression remained cautious.
“Possibly, but it raises issues around
transparency, equity, and consumer
trust. If people suspect you’re using hidden individualized pricing, trust could
erode rapidly. Customers value transparency and fairness; dynamic pricing,

even done in secret, risks compromising
those core values.”
Marcus sighed. “Thank you both.
You’ve given me a lot to consider.”

PROFIT OR PURPOSE?
Marcus waited quietly at the front of the
small, comfortably furnished conference room. Gathered around him were
a handful of trusted franchise owners
known as the Inner Grill, an informal
advisory group (and nickname) he’d
inherited from the previous Burger &
Bites CEO. The group met twice a year,
away from the larger, more formal franchise meetings. Marcus valued these
discussions greatly; he considered franchise owners to be the heart and soul
of Burger & Bites, as the company had
long chosen franchisees with a passion
for serving their neighborhoods and
then given them wide leeway for community projects. As he surveyed their
familiar, attentive faces, Marcus had a
feeling this conversation might be the
most consequential one of his tenure.
He cleared his throat and kicked
things off. “Good afternoon, everyone.
It’s always an honor to gather with
you all. As you know, we are facing
major cost pressures. We’re considering various companywide responses,
but there’s one I want to talk about in
detail. I’m proud that our recent digital
transformation—especially the menu
screens and app upgrades—has positioned Burger & Bites to better serve
our increasingly tech-savvy customers.
And now, with that new technology
in place, we face a pivotal decision:
Should Burger & Bites implement
dynamic pricing?”

Araceli Martinez stood to speak first.
A franchisee based in Texas, Araceli
owned 15 restaurants across three
states. She was known widely for her
deep community involvement, including scholarship programs for area
students and regular meal donations
to local shelters. Her voice was firm
and filled with conviction. “Marcus,
innovation is important, and I fully
respect that. However, the legacy of
Burger & Bites is rooted in fairness and
reliability. Customers across all income
levels visit our restaurants, but it’s our
lower-income patrons who feel price
fluctuations most acutely. This change
would affect them the most. Unexpected price hikes could significantly
damage the customer loyalty we’ve
worked so hard to build.”
Devonte Harrison rose next, animated and passionate. A young entrepreneur who had rapidly amassed eight
restaurants across Ohio, he was known
for ensuring they had high-speed Wi-Fi
and charging stations, making them
popular hangouts for younger customers. “Marcus, Araceli has valid points,
and I think we all share some concerns.
But I also think dynamic pricing is the
future of our business. Our competitors
are already heading in this direction.
It’s become the norm in other sectors.
Customers will adapt, adjusting their
dining habits to times and places that
fit their budgets.”
John Donohue, a respected figure
among the franchisees, stood slowly.
His father had been one of the original
Burger & Bites owners in Iowa, and he
now ran 12 highly profitable locations,
renowned for their unwavering support
of rural farmers and schools.

Harvard Business Review
September–October 2025

143

“If dynamic pricing is inevitable,
perhaps we could at least implement
price caps to prevent excessive surges.
Or, better yet, why not simply raise
prices slightly across the board and

use dynamic pricing exclusively for
promotions and discounts? That way,
we reassure customers they won’t face
surge pricing.”
Marcus exhaled, visibly conflicted.
“John, that’s an appealing idea, and certainly worth exploring further. But with
the intense pressures we’re facing to
boost margins, I’m hesitant to publicly
commit to a hard price cap. The reality

is, we don’t fully know the revenue we
might be leaving on the table—and the
market and our investors won’t easily
let us forget it.”
The room fell silent. Marcus looked
around at all the franchisees—deeply
committed yet divided on how to
proceed.
“Let me summarize where we’re
at before we break for lunch,” Marcus

­

Should Burger &
Bites move forward
with dynamic pricing?
THE EXPERTS RESPOND.

Dynamic pricing is
not the right tool for
Burger & Bites to use
to respond to rising
costs, but other
tactics might help.
PHILIP DAUS is a partner and

the head of the Houston office
of Simon-Kucher, a global
pricing and growth consultancy.

144

Harvard Business Review
September–October 2025

While customers have grown
accustomed to dynamic pricing
for some goods and services, they
don’t like to see it in quick-service
restaurants (QSR). In our recent
study of more than 500 frequent
QSR patrons, 71% said they viewed
the practice negatively. Whether
people have walked into a restaurant or sat in a drive-through line,
they don’t want to be forced to
pay higher-than-expected prices.
That’s especially true during

periods when the algorithm has
determined that demand is high:
when everyone is hungry, service probably slower, food less
consistent, and tempers short.
What’s more, during slow periods,
dynamic pricing won’t boost
demand, because few people know
prices are lower. Customers may
end up ordering a larger lunch, but
the benefit is small.
Marcus could also struggle to
push through dynamic pricing with
franchisees, since their economic
goals typically differ from those
of the parent company. While they
want to optimize unit-level profit,
the chain is chasing market-share
growth, traffic, and scale to attract
more franchisees and negotiate
better supply terms.
Fortunately, there are several
lower-risk ways to protect margins
without undermining loyalty. People ordering through third-party
delivery apps already expect fees
and some price swings, so Marcus
can roll out dynamic pricing through
that channel. A well-timed cut
could steer users to Burger & Bites
before they scroll elsewhere.
Next, Marcus can try to squeeze
more value from the company’s
own app-targeted promotions. For
example, use customers’ purchase

histories and geolocations to push
special offers that feel like a perk.
Burger & Bites can pass on some
of the increased cost from international suppliers to consumers
through clever marketing: maybe a
special “Australian grass-fed beef”
burger or “fresh avocado” topping.
Another option is to map every
menu item to the job it performs.
Marcus could keep “traffic
drivers”—­hamburgers and fries—
at the same price but apply mod­est
increases to specialty dishes and
“veto items,” such as salads, which
exist so the health‑­conscious
friend doesn’t veto the group’s
visit. Or, use well-designed bundles that add a drink or a side for
a small premium. Customers will
see the extra value, which makes
it easier to quietly increase the
average take from orders.
Prices can also flex from store
to store. A downtown location that
feeds office workers or well-off
residents can potentially charge
more than a rural drive-through.
Big chains often leave money
on the table by sticking to one
national price, rather than using
data to truly understand customers’ willingness to pay.
Eventually, Burger & Bites could
introduce new higher-margin items

“Why not simply raise prices across the board and use dynamic pricing for promotions
and discounts? That way we reassure customers they won’t face surge pricing.”
said. “We have the technology, we’ve
seen dynamic pricing work elsewhere,
and the financial upside is clear. But
the customer trust that Burger & Bites
has painstakingly built on fairness,
consistency, and community connection is priceless, intangible, and
perhaps more fragile than we realize.”
Many of the franchisees murmured
in appreci­ation of the sentiment. “So,

people will value; think a chicken
sandwich with a unique spice mix
but cheaper thigh meat. Inflation is
then a reason to innovate. Marcus
should try new approaches with
the channels he already controls—
app‑driven offers, store‑­specific
prices, and new products—
before he hands the till over
to an algorithm.

DAVE BURWICK is the CEO of
Spindrift Beverage Company.

Marcus isn’t
ready to make the
decision about
dynamic pricing.

I guess the question is, What do we
do?” His words hung in the air for a
long moment. “I would sure pay a lot
of money to know the answer,” Marcus
concluded, chuckling.
The group laughed warmly, grateful
for the moment of authenticity. They
filed out of the conference room and
headed outside, where company shuttles waited to take them to a local Burger

He needs to more carefully con‑
sider how it might impact the com‑
pany’s value proposition, brand
equity, and trust with customers.
First, though, credit where it’s
due: In a high-pressure situation,
he resisted the temptation to fall
back on his training and skills as
a “tech wizard.” Expectedly, that’s
how Jay, the CTO, has responded,
by pushing a technological solu‑
tion without working backward
from consumer needs. By contrast,
Marcus, as CEO, pulled in a diverse
circle of advisers—finance, mar‑
keting, tech, franchisees, and out‑
side specialists—and fostered an
open, psychologically safe debate.
That willingness to listen and filter
different viewpoints, rather than
dictate, is the mark of a leader on
the right path.
Now he should sit down with his
CMO and ask a blunt question: Why
do people trust Burger & Bites?
If the answer is quality, consis‑
tency, community connection, and
no‑surprises value, that lens must
frame every move. Surge pricing
that feels like a tax on loyalty would
violate the very promise that draws
customers through the door.
Then Marcus should try dif‑
ferent ways to absorb the cost
increases before passing them

& Bites, an Inner Grill tradition. But as
Marcus walked to the door, he realized
he had lost his appetite. The decision
he faced was not just about profits or
technology—­­it was about the identity
and integrity of his company.
ELIE OFEK is the Malcolm P. McNair

Professor of Marketing at Harvard
Business School.

on to the consumer. At Spindrift,
tariffs have hit our imported fruit
costs. We went straight to suppli‑
ers and negotiated with them to
split the pain. The scripting goes
something like this: “We’re both in
a bind. Tariffs are pushing costs
up, and if we pass the full hit to
customers, demand will dip and
nobody wins.” Marcus can remind
the avocado and beef importers
that they’ve built a long, success‑
ful partnership and that he has a
plan to grow Burger & Bites. He can
share exactly how his digital menu
investment will eventually pay off
for them—if consumer prices stay
predictable. Few suppliers want to
bet against a brand that’s expand‑
ing in a flat category.
Once supplier talks are under‑
way, Marcus should hunt for inter‑
nal savings by potentially trimming
overhead, scrutinizing freight and
packaging, or delaying nonessen‑
tial capital expenditure. Marketing
is off‑limits; you can’t cut demand
and expect margin to rise. As a last
resort, layoffs may be necessary.
If there is still a gap, Burger &
Bites could raise menu prices
across the board, but only after
the category leader—likely
McDonald’s—goes first. In general,
big players move first on price

increases since they have the
market power to do so; that’s why
Walmart has recently talked about
tariff-related changes. Burger &
Bites can let larger competitors
absorb most of the social media
heat, then institute a modest
2%–4% bump, keeping its “fair
player” image intact.
After exploring all of these
options, if Marcus still wants
to consider dynamic pricing, he
can start by experimenting in
safe “sandlots,” such as groups of
stores or regions. Could Burger &
Bites use promotions and dis‑
counts to drive traffic that will
counter the sales it will lose due
to price increases? Could it use
the digital menus to increase
sales at off-peak hours through
lower prices? The goal should be
to refill quiet periods and recap‑
ture any visits lost to inflation,
not to squeeze extra dollars out
of customers. Marcus might even
enhance brand trust by being fair
and transparent with consumers,
which in turn will make his franchi‑
sees and shareholders happy—a
win for all.

HBR Reprint R2505P
Reprint Case only R2505X
Reprint Commentary only R2505Z

Harvard Business Review
September–October 2025

145

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