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Decision Analysis and Modeling Project Sneha Y (B63) Problem Sneha got admission in XYZ College of Management.

She has five options of specializations Finance, Marketing , IT, General Management and Operations and she is inclined towards Finance, Marketing and Operations . She already got admissions in various colleges. Unable to decide which college to join she took the advice of friends, seniors and classmates but could not make any decision .She approached a consultant for advice whether to join the college or not. She wanted to join a college which has average salary package above 10lakhs and she could not find any data from the official reports published by XYZ college. Also she was curious to know what are the salaries paid for each of the specialization she was interested. The consultant takes up the problem and evaluates the placement records and attendance lists about students taking up various specializations. He was able to access the past records from XYZ College with its permission. The following is the data furnished by College Number of students in batch=400 Number of students placed in different streams in Finance, Marketing and Operations during the years 2002-2010. Finance Students 118 113 112 120 127 126 128 127 129 Marketing Students 129 127 126 122 125 124 121 119 118 Operations Students 95 97 98 98 98 100 103 102 104

Year 2002 2003 2004 2005 2006 2007 2008 2009 2010

Students taking various specialization and final placements during the year 2010.These probabilities are conditional probabilities .For example the value 0.10 in first row denotes the probability that given the student is placed in Finance ,the probability that he takes marketing as specialization.

Specialization P(Specialization/Placement) Finance Marketing Operations Finance 0.85 0.03 0.03 Marketing 0.10 0.91 0.02 Operations 0.05 0.06 0.95

Placement

The average salary of each specialization (Finance, Marketing and Operations) from year 2002-2010 are given in the table below: Finance(Rs. in lakhs) Marketing(Rs. in lakhs) 8.3 8.1 8.2 8.42 9.7 9.2 9.56 9.8 10.34 10.6 11.89 11.23 10.23 10.5 11.59 11.1 11.23 11.34 Operations(Rs. in lakhs) 7.12 7.3 8.4 8.92 9.3 10 9.2 9.8 10.4

Year 2002 2003 2004 2005 2006 2007 2008 2009 2010

After gathering the data consultant assured her that he would investigate about 1) What salary can she expect if she joins XYZ in Finance, Marketing and Operations? 2) What is the expected salary package from each specialization?

Solution Procedure: Using Linear Regression Analysis the consultant tries to forecast the values of Salaries and Number of students placed in each specialization. (The calculations and results are in Appendix 1.1 to 1.6) Variable Salary_F Salary_M Salary_Op Place_F R 0.87 0.937 0.929 0.854 Constant -835.079 -826.804 -770.059 -4053.11 Year .421 .417 .388 2.067 Forecast 11.55 11.87 10.21 133

Salary of Finance Salary of Marketing Salary of Operations No. of students

placed in Finance No. of students placed in Marketing No. of students placed in Operations

Place_M

0.953

2664.378

-1.267

116

Place_Op

0.957

-2006.856

1.050

105

Using the forecasted values for students placed in different specializations ,he calculates probabilities that a student takes a particular specialization are placed. The following table gives the values of probabilities: Stream Finance Marketing Operations P(Placement in Stream) 133/400=0.3325 116/400=0.29 105/400=0.2625

The following is the table for finding out conditional probabilities Specialization Placement(Ei) P(Ei) Finance Finance 0.3325 Marketing 0.29 Operations 0.2625 P(S/Ei) 0.85 0.03 0.03 P(S & Ei) 0.283 0.0087 0.0078 0.2995 0.0332 0.2639 0.0052 0.3189 0.0166 0.0174 0.2493 0.2833 P(Ei/S) 0.94 0.029 0.026

Marketing

Finance Marketing Operations

0.3325 0.29 0.2625

0.10 0.91 0.02

0.104 0.827 0.016

Operations

Finance Marketing Operations

0.3325 0.29 0.2625

0.05 0.06 0.95

0.058 0.061 0.879

The consultant draws the decision tree for the above probability values and payoff values forecasted using regression analysis. See Appendix 1.7

Conclusions: 1) The expected value of the salary if you join XYZ in 2011 is Rs. 9.934 lakhs and Sneha rejects the College because its return value is less than Rs.10 lakhs 2) Finance as specialization gives highest salary of Rs.11.466lakhs followed by Marketing with a salary of Rs.11.175 lakhs and Operations with salary of Rs.10.367 lakhs

APPENDIX Linear Regression Analysis: 1.1) Salary Ops

Model Summary Model 1 R .929a R Square .863 Adjusted R Square .843 Coefficientsa Unstandardized Coefficients Model 1 (Constant) Year B -770.059 .388 Std. Error 117.369 .059 .929 Standardized Coefficients Beta t -6.561 6.637 Sig. .000 .000 Std. Error of the Estimate .45321

a. Predictors: (Constant), Year

a. Dependent Variable: Salary_Op The forecast salary of Operation students Y=A+BX Y=-770.059+.388*2011=10.21 1.2)Salary M

Model Summary Model 1 R .937a R Square .877 Adjusted R Square .859 Std. Error of the Estimate .45730

a. Predictors: (Constant), Year

Coefficientsa Model Unstandardized Coefficients Standardized Coefficients t Sig.

B 1 (Constant) Year -826.804 .417

Std. Error 118.429 .059

Beta -6.981 .937 7.066 .000 .000

a. Dependent Variable: Salary_M The forecast salary of Marketing students Y=A+BX Y=-826.804+0.417*2011=11.87 1.3)Salary Fin Model Summary Model 1 R .870a R Square .757 Adjusted R Square .722 Std. Error of the Estimate .69936

a. Predictors: (Constant), Year

Coefficientsa Unstandardized Coefficients Model 1 (Constant) Year B -835.079 .421 Std. Error 181.115 .090 .870 Standardized Coefficients Beta t -4.611 4.667 Sig. .002 .002

a. Dependent Variable: Salary_F

The forecast salary of Finance students Y=A+BX Y=--835.079+0.421*2011=11.55

1.4)Student Fin Model Summary

Model 1

R .854a

R Square .729

Adjusted R Square .690

Std. Error of the Estimate 3.68954

a. Predictors: (Constant), Year Coefficientsa Unstandardized Coefficients Model 1 (Constant) Year B -4023.511 2.067 Std. Error 955.494 .476 .854 Standardized Coefficients Beta t -4.211 4.339 Sig. .004 .003

a. Dependent Variable: Stud_fin

The forecast number of students taking Finance as specialization Y=A+BX Y= -4023.511+2.067*2011=133 1.5)Stud_M Model Summary Model 1 R .935a R Square .873 Adjusted R Square .855 Std. Error of the Estimate 1.41197

a. Predictors: (Constant), Year Coefficientsa Unstandardized Coefficients Model 1 (Constant) Year B 2664.378 -1.267 Std. Error 365.662 .182 -.935 Standardized Coefficients Beta t 7.286 -6.949 Sig. .000 .000

a. Dependent Variable: Stud_M The forecast number of students taking Marketing as specialization Y=A+BX

Y= 2664.378- 1.267*2011=116 1.6)Stud_op Model Summary Model 1 R .957a R Square .916 Adjusted R Square .904 Std. Error of the Estimate .93138

a. Predictors: (Constant), Year Coefficientsa Unstandardized Coefficients Model 1 (Constant) Year B -2006.856 1.050 Std. Error 241.202 .120 .957 Standardized Coefficients Beta t -8.320 8.733 Sig. .000 .000

a. Dependent Variable: Stud_Op

The forecast number of students taking Operations as specialization Y=A+BX Y= -2006.856+1.050*2011=105

1.7)

DECISION TREE ANALYSIS


PF
11.55*0.94=10.857

Finance

0.029 PM 11.87*0.029=0.344

PO

10.21*0.026=0.265

PF 9.934 11.175 Choice of Specializati on 0.3189


Marketing

11.55*0.104=1.19

PM

11.87*0.827=9.81

PO

10.21*0.016=0.16

10.367 Operations 0.061

PF

11.55*0.058=0.669

PM

11.87*0.061=0.724

PO

10.21*0.879=8.974

PF- Placed in Finance PM-Placed in Marketing

PO-Placed in Operations

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