QUANTITATIVE

ANALYSIS IN
MANAGEMENT
DECISIONS
Dr. B Dayal

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CHAPTER
ONE
Overview

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Chapter:1
Overview of quantitative analysis
● Introduction
● Definition
● Types of quantitative analysis
● Components of quantitative analysis
● Characteristics of quantitative analysis
● Classification of Quantitative analysis
● Functions of quantitative analysis
● Uses of quantitative analysis
● Limitations of quantitative analysis
● Computers in quantitative analysis

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INTRODUCTION

Managers as decision makers:

● Issues:
● How much to produce
● What prices to charge
● How many staff to employ
● Whether to invest in new capital equipment
● whether to fund a new marketing initiative
● whether to introduce a new range of products
● whether to employ an innovative method of production.

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Decisions in the Management Functions
Planning • What are the organization's long-term
objectives?
• What strategies will best achieve those
Objectives?
• What should the organization's short-term
objectives be?
• How difficult should individual goals be?
Organizing • How many employees should I have
Report directly to me?
• How much centralization should there be in
the organization?
• How should jobs be designed?
• When should the organization implement a
different structure?
Leading • How do I handle employees who appear
to be low in motivation?
• What is the most effective leadership
style in a given situation? •
How will a specific change affect worker
productivity?
• When is the right time to stimulate conflict?
Controlling
• What activities in the organization need
to be controlled?
• How should those activities be controlled?
• When is a performance deviation
significant?
•What type of management information
system should the organization
have?
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Decision Making

● Decision
○ Adhoke Decision
○ Intuitive Decision
○ Decisions based on Quantitative analysis

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Decision Making

Decision
● Adhoke Decision
Based on:
● No basis
● No logic
● No facts and figures
Result: Maximum chances of failing
● Intuitive Decision
● Based on Intuition
● Result: Good chances of being unsuccessful.
Decisions based on Quantitative analysis
● Maximum chances of success
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Intuitive Decision making

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Decision Making

● Decision
○ Decision making is a process of identifying a set of feasible
alternatives and from these selecting the best course of action. It
is a technique used to find a solution to solve problem
○ The Definition
“The process of identifying and selecting a course of action to solve a
specific problem”.
-James Stoner
“A decision is a course of action which is consciously chosen for achieving
a desired result.”
-Haynes and Massie

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PROBLEMS IN DECISION MAKING

● Failure to define the problem

● Failure to understand the problem
● Complexity of problem:
● False information:
● Unable to find alternatives
● Obligations of decision maker
● Decisions influenced by others

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Decision Making Process

● Identifying a problem
● Identify decision criteria
● Collect data pertaining to the problem.
● Developing, analyzing, and selecting an alternative
● Implementing the selected alternative.
● Evaluating the decision’s effectiveness.

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Decision Making Process

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Step 1: Identifying the Problem

● Problem
● A discrepancy between an existing and desired state of affairs.

● Characteristics of Problems

● A problem becomes a problem when a manager becomes aware of it.

● There is pressure to solve the problem.
● The manager must have the authority, information, or resources
needed to solve the problem.

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Step 2: Identifying Decision Criteria

● Decision criteria are factors relevant to resolve the problem:

● Costs that will be incurred (investments required)

● Risks likely to be encountered (chance of failure)
● Outcomes that are desired (growth of the firm)

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 QUESTION TIME
Which one of the following is not a method of
decision making?

a.Adhoke Decision
b. Intuitive Decision
c. Decisions based on Quantitative analysis
CREDITS: This presentation template was created by
d. Emotional
Slidesgo, includingDecision
icons by Flaticon, infographics &
images by Freepik

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Step 3: Allocating Weights to the Criteria

● Decision criteria are not of equal importance:

● Assigning a weight to each item
● Places the items in the correct priority order of their importance.

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Criteria and Weight in Car-Buying Decision
(Scale of 1 to 10)

CRITERION WEIGHT
Price 10
Interior comfort 8
Durability 5
Repair record 5
Performance 3
Handling 1

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Step 4: Developing Alternatives

● Decision criteria are not of equal importance:

● Assigning a weight to each item
● Places the items in the correct priority order of their importance.

Step 5: Analyzing Alternatives

● Appraising each alternative’s strengths and weaknesses

● An alternative appraisal is based on its ability to resolve the issues
identified in steps 2 and 3.

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Assessed Values of Laptop Computers Using
Decision Criteria

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Step 6: Selecting an Alternative

● Choosing the best alternative

○ The alternative with the highest total weight is chosen.

Step 7: Implementing the Alternative

● Putting the chosen alternative into action.

○ Conveying the decision to and gaining commitment from those who
will carry out the decision.

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Step 8: Evaluating the Decision’s Effectiveness

● The soundness of the decision is judged by its outcomes.

○ How effectively was the problem resolved by outcomes resulting

from the chosen alternatives?
○ If the problem was not resolved, what went wrong?

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INTRODUCTION
Definition of quantitative analysis
● In its plural form, quantitative analysis stands for numerical facts ( facts
expressed in numbers) pertaining to a collection of objects.
● In its singular form, it stands for the science of collection, organization &
interpretation of numerical facts.
● ‘The science of estimates & probabilities’. - Boddington
● ‘Science of collection, presentation, analysis & interpretation of numerical data.’
- Croxton & Cowden
● ‘Quantitative analysis may be defined as an aggregate of facts affected to a
marked extent by multiplicity of causes, numerically expressed, enumerated or
estimated according to reasonable standards of accuracy, collected in a
systematic manner for a predetermined purpose & placed in relation to each
other.’ - Horace Secrist-
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Types of Quantitative Analysis

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COMPONENTS OF QUANTITATIVE ANALYSIS

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CHARACTERISTICS OF QUANTITATIVE ANALYSIS

● Quantitative analysis is an aggregate of facts.

● Affected to a marked extent by multiplicity of causes.
● Numerically expressed.
● Enumerated or expressed to reasonable standards of accuracy depending on
the end use.
● Collected, mathematical modelled and interpreted in a systematic manner.
● Related data are collected for a predetermined purpose.
● Data are placed in relation to each other

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FUNCTIONS OF QUANTITATIVE ANALYSIS

● Simplifies mass data.

● Makes comparison easier.
● Brings out hidden relations between variables.
● Reduces bulk of data.
● Decision making process is eased. Adds precision to thinking.
● Guides policy formulation & aids planning.
● Brings out or indicates trends & tendencies.
● Aids studying relationship between different factors. Relation between production &
prices.
● To provide tools for scientific research
● To help in choosing an optimal strategy
● To enable in proper deployment of resources
● To help in minimizing costs
● To help in minimizing the total processing time required for performing
a set of jobs 27
USES OF QUANTITATIVE ANALYSIS

● Business and Industry.

● Linear programming: Used for optimal allocation of scarce resources in the problem
of determining product mix
● Inventory control model: Useful in deciding when and how much items are to be
purchased
● CPM, and PERT: Helps in determining the earliest and the latest times for the events
and activities of a project. This helps the management in proper deployment of
resources.
● Decision tree analysis and simulation technique: help the management in taking the
best possible course of action under the conditions of risks and uncertainty.
● Queuing theory: Used to minimize the cost of waiting and servicing of the customers
in queues.
● Replacement theory: Helps to determine the most economic replacement policy
regarding replacement of equipment.
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 QUESTION TIME
Which one of the following is a characteristics
of quantitative analysis?

a. Brings out or indicates trends & tendencies.

b. Guides policy formulation & aids planning
c. Collected, mathematical modelled and interpreted in a
CREDITS: This presentation template was created by
systematic
Slidesgo, includingmanner
icons by Flaticon, infographics &
d. Decision making process
images by Freepik is eased. Adds precision to thinking.

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Classification of Quantitative Techniques

● Mathematical Quantitative Techniques

● Statistical Quantitative Techniques
● Programming Quantitative Techniques

● Mathematical Quantitative Techniques:

● Permutations and Combination
● Set Theory
● Matrix Algebra:
● Determinants:
● Differentiation:
● Integration
● Differential Equation:
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Classification of Quantitative Techniques

● Statistical Quantitative Techniques: Statistical techniques involve:

● Collection of data:
● Measures of Central tendency, dispersion, skewness and Kurtosis
● Correlation and Regression Analysis
● Index Numbers:
● Time series Analysis:
● Interpolation and Extrapolation:
● Statistical Quality Control
● Ratio Analysis:
● Probability Theory:
● Testing of Hypothesis

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Classification of Quantitative Techniques

Programming techniques involve:

● Linear Programming:
● Queuing Theory:
● Game Theory:
● Decision Theory:
● Inventory Theory:
● Network programming:
● Simulation:
● Replacement Theory:
● Nonlinear Programming:
● Sequencing:
● Branch and Bound Technique

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LIMITATIONS OF QUANTITATIVE ANALYSIS
● Does not deal with qualitative data. Only with quantitative data.
● Cannot deal with an individual fact. Can apply to aggregate of facts.
● Quantitative conclusions/inferences are not exact. They are probabilistic/ true
only on an average.
● Quantitative techniques involves mathematical models, equations and other
mathematical expressions
● Quantitative techniques are based on number of assumptions. Therefore, due
care must be ensured while using quantitative techniques, otherwise it will
lead to wrong conclusions.
● Quantitative techniques are very expensive.
● Quantitative techniques do not take into consideration intangible facts like skill,
attitude etc.
● Quantitative techniques are only tools for analysis and decision-making.
They are not decisions itself.
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COMPUTERS & QUANTITATIVE ANALYSIS
● When collected data are small, the analysis and interpretation can be done
without much difficulty. But when a huge amount of data, the process of
analysis and interpretation will be difficult.
● With the advent of computers a lot of statistical programs are available in the
market. They help us in summarizing, presenting & analyzing the mass data in a
short time. Some of them are:
○ Mminitab
○ SPSS
○ Texto
○ Contexto
○ Excel
○ E-view
○ MS project
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THANK YOU!

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