BUSINESS ADMINISTRATION

FOR ENGINEERS
Instructor: Lai Van Tai
CONTENT

Chapter 1: Introduction
Chapter 2: Decision making
Chapter 3: Accounting and Finance
Chapter 4: Marketing management
Chapter 5: Organizational structure and HR Management
Chapter 6: Operation management
Chapter 7: Quality Management
Chapter 8: Project management
Chapter 2: DECISION MAKING
1. Primary concept
2. Decision types
3. Decision process
4. Decision under uncertainty circumstances
5. Decision under risk condition
6. Mathematical models and Quantitative methods
for decision making
1. INTRODUCTION

- Concept definition
- Assumptions for behavioral reasonably
-Should have clear objectives
-All alternatives should be clearly determined
-Weight of criteria should be clearly state and fixed /
showing favorable levels of decision makers
-Enough time and cost for collect data and info for
decision making
-The final decision always being the best choice to
achieve objectives
2. DECISION TYPES

o According to problems structure

n Structured problems à programmed decision
n Unstructured problems à not in program decision

o According to features/circumstances of problems

n Certainty
n Uncertainty
n Risk
3. DECISION MAKING PROCESS
Problem define

Finding alternatives

Finding possible status

Market conditions
Costs/benefits analysis High demand Low demand

Small Factory 200 -20

Select suitable model for the
best choice Average 350 -150
Factory
Decision making Large factory 600 -300
4. DECISION UNDER UNCERTAIN CIRCUMSTANCES
(PAYS OFF MATRIX)

o Maximax
o Maximin
o Equal likely
o Hurwiez
o Minimax
4. DECISION UNDER UNCERTAIN CIRCUMSTANCES

o Maximax (optimistic - Best among the best)

STATUS – Benefits
Alternativ
es S1 S2 S3 S4 Max

A1 100 300 -50 800 800

A2 1200 400 -100 -20 1200

A3 -80 0 500 1000 1000

4. DECISION UNDER UNCERTAIN CIRCUMSTANCES

o Maximin (pessimistic - Best among the Worst)

STATUS – Benefits
Alternativ
es S1 S2 S3 S4 Min

A1 100 300 -50 800 -50

A2 1200 400 -100 -20 -100

A3 -80 0 500 1000 -80

Do nothing !
4. DECISION UNDER UNCERTAIN CIRCUMSTANCES

o Equal likely

STATUS – Benefits
Alternativ
es S1 S2 S3 S4 Mean

A1 100 300 -50 800 287.5

A2 1200 400 -100 -20 370

A3 -80 0 500 1000 355

 4. DECISION UNDER UNCERTAIN CIRCUMSTANCES

o Minimax è OL matrix
STATUS – Benefits
Alternat
ives S1 S2 S3 S4
A1 100 300 -50 800

A2 1200 400 -100 -20 STATUS – OL

Alternat
A3 -80 0 500 ives1000 S1 S2 S3 S4 Max
A1 1100 100 550 200 1100

A2 0 0 600 1020 1020

A3 1280 400 0 0 1280
4. DECISION UNDER UNCERTAIN CIRCUMSTANCES

o Hurwicz (with α = 0.3)

Hi = α. Max(Sj) + (1-α).Min(Sj)

STATUS – Benefits
Alternativ
es S1 S2 S3 S4 Mean

A1 100 300 -50 800 205

A2 1200 400 -100 -20 290

A3 -80 0 500 1000 244

4. DECISION UNDER UNCERTAIN CIRCUMSTANCES

o Maximax
o Maximin
o Equally likely
o Hurwiez
o Minimax
5. DECISION UNDER RISK CONDITIONS
o Using Decision tables
n EMV approach
STATUS
Alternativ
es S1 S2 S3 S4 EMV

A1 100 300 -50 800 425

A2 1200 400 -100 -20 342

A3 -80 0 500 1000 434

Pj 0.2 0.3 0.1 0.4

n EVWPI (Expected value with perfect information) = Pj*Max(Sj)

n EVPI (Price of Info) = EVWPI – Max EMV = 810 – 434 = 376
5. DECISION UNDER RISK CONDITIONS
o Using Decision tables
n EMV approach
o EVPI (Expected value of perfect information)
n Min EOL (Expected Opportunity of loss)

STATUS – OL
Alternat
ives S1 S2 S3 S4 EMV
A1 1100 100 550 200 385

A2 0 0 600 1020 468

A3 1280 400 0 0 376
Pj 0.2 0.3 0.1 04
5. DECISION UNDER RISK CONDITIONS
o Using Decision tables
n EMV approach
o EVPI (Expected value of perfect information)
n Min EOL (Expected Opportunity of loss)
o Using Decision tree
n Assumptions
n 5 Steps for decision making
o Problem statement
o Draw the tree
o Add prob. For each status node
o Estimate profit/ loss for each node
o Use EMV for calculation and choice
6. Mathematical models and Quantitative
methods for decision making

o Quantitative methods
o Linear programming
o Multi-Criteria Decision Making
o Decision making from Utility theory
6. Mathematical models and Quantitative
methods for decision making

6.1 Quantitative method concept

1. What is quantitative method
2. Development history of Quantitative method
3. Steps in Quantitative Method
4. Some mathematical models
6. Mathematical models and Quantitative
methods for decision making

6.1 What is quantitative method?

Science of using mathematic model in calculation
and analyzing data serving for decision making
process
Quantitative vs Qualitative è need both in decision

data Processing Information

6. Mathematical models and Quantitative
methods for decision making
3. 7 Steps in Quantitative Method
Problem statement

Modeling

Data collect

Analyzing/ solving/results

Test of solutions

Analyzing results

Apply the results

6. Mathematical models and Quantitative
methods for decision making
3. Steps in quantitative methods
Problem statement
Physical models
Modeling Flowchart model
Mathematical model
Data collect

Analyzing/ solving/results

Test of solutions

Analyzing results

Apply the results

6. Mathematical models and Quantitative
methods for decision making
3. Steps in quantitative methods
Problem statement

Modeling
Data characteristics
Data sources
Data collect
Problems in data collection
Analyzing/ solving/results process

Test of solutions

Analyzing results

Apply the results

6. Mathematical models and Quantitative
methods for decision making
3. Steps in quantitative methods
Problem statement

Modeling
solving/ equation system solutions
Trial and error method
Data collect
List out and comparing between Alt.
Analyzing/ solving/results Using mathematical method
(algorithm method)
Test of solutions

Analyzing results

Apply the results

6. Mathematical models and Quantitative
methods for decision making

4. Some mathematical models

Decision making process; Linear programming;
integer programming/ dynamic programming;
multi-criteria decision making; Queuing theory;
Game theory; Utility theory; simulation model….
6. Mathematical models and Quantitative
methods for decision making
6.2 Linear programming
1. Introduction: Solving problems with Max benefits/ Min
costs and resources constraints è optimization problems
2. Standard model
3. Solving linear programming problem by chart
method
Objective function
Z = f(x1, x2,..., xn) à Max/min
Constraint functions
Ri = ri(x1, x2,..., xn) < > ????
 Reset
the model

No
Releasing

yes
the Is it
constraints optimum?

No
Set up: correct
Problem

yes

yes
statement: Linear Existing Does it
-Target
relationship? Feasible limit the
- Decision var
function
constrain searching Findings Final
-constraints area? area? results
- Target
function
incorrect

Replace by non-
linear models to
solve
6. Mathematical models and Quantitative
methods for decision making

Target: Profit

Inputs/ material Types of products

Per unit Rice Mill Resources available

• Land area [Ha/ton] 2 3 50 Ha

• Water [103m3/ton] 6 4 90 ´ 103m3

• HR [Working days/Ton] 20 5 250 Working days

Profit [USD/ton] 18 21
6. Mathematical models and Quantitative
methods for decision making
Target: Profit
Supposed that: X is the amount of Rice produced
Y is the amount of Mill produced

20X+
Y
Objective function Z = 18X + 21Y

5Y =
Constraint function

6X
+4

250
Land 2X + 3Y £ 50

Y=
Water 6X + 4Y £ 90

90
HR 20X + 5Y £ 250
X, Y ≥ 0 A
18
B
X+
21 2X
Y +3
=0 Y
=5
0
C

D X
6. Mathematical models and Quantitative
methods for decision making

Target: Cost
Inputs/ material /components Types of Product

Per unit Type I Type II Resources available

• Component A 5 10 90

• Component B 4 3 48

• Component C 1.5 0.5 15

Cost [USD/ton] 2 3
6. Mathematical models and Quantitative
methods for decision making

o Multi-Criteria Decision Making

Alternative j Company Company Company
Factor i A B C
Weight
Salary 0.7 0.8 0.9 0.6
Promotion opportunity 0.9 0.7 0.6 0.3
Working place 0.6 0.8 0.9 0.1

Weighted average 0.75 0.77 0.81

Using the weighted average value for comparison and make decision
6. Mathematical models and Quantitative
methods for decision making

o Decision making from Utility theory

1. What is Utility?
2. Calculation of Utility
3. Evaluating alternatives by using Utility theory
6. Mathematical models and Quantitative
methods for decision making

0,30

0,15

0,05

-20.000 -10.000 0 10.000 Tiền