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CHAPTER 3

Marketing Decision Making


and Case Analysis

AFTER READING THIS CHAPTER


YOU SHOULD BE ABLE TO:
1. Describe each step in the decisionmaking process using the
DECIDE method.
2. Prepare and present an analysis of
a written case.

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DECISION-MAKING PROCESS

Decision making is a rational


and systematic process and
that its organization is a
definite sequence of steps,
each of them in turn rational
and systematic.
Peter Drucker
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CHAPTER 3: MARKETING DECISION


MAKING AND CASE ANALYSIS

DECISION-MAKING
PROCESS

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DECISION-MAKING PROCESS: DECIDE


Define the problem
Enumerate the decision factors
Consider relevant information
Identify the best alternative
Develop a plan for implementing
the chosen alternative

Evaluate the decision and the


decision process
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DECISION-MAKING PROCESS: DECIDE


Step 1: Define the Problem

A problem well defined is half solved.


John Dewey

Problem definition framework includes:


Objectives

Constraints
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Success
Measures
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DECISION-MAKING PROCESS: DECIDE


Step 2: Enumerate the Decision Factors

Two decision factors to be enumerated


and related to each other:
Alternative
Courses of Action

Uncertainties

Controllable by the
decision maker such as
the marketing mix

Uncontrollable factors
that the manager cannot
influence

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DECISION-MAKING PROCESS: DECIDE


Step 3: Consider Relevant Information
Relevant information consists of information that
relates to the alternatives identified by the
manager as being likely to affect future events.
Includes characteristics of the following:
Industry
Consumers
Competitors

Organization
(competitive
strengths and
position)
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Alternatives

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DECISION-MAKING PROCESS: DECIDE


Step 3: Consider Relevant Information

Identifying relevant information is difficult:


There is often too much info and viewpoints
Determining what does and does not matter
is a skill learned through experience
Dont consider everything as factual info
Sometimes relevant info must be created

A manager has performed a situation analysis


when steps 1 through 3 are completed
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DECISION-MAKING PROCESS: DECIDE


Step 4: Identify the Best Alternative

Decision analysis:
Matches each alternative with the uncertainties
in the environment
Assigns a quantitative value to the outcome
associated with each match

Uses a decision tree and a payoff table to


show the relationship among alternatives,
uncertainties, and potential outcomes
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DECISION-MAKING PROCESS: DECIDE


Step 4: Identify the Best Alternative

Example: El Nacho Foods


Alternative
Courses of Action
for Frozen Dinners

Uncertainties
about Competitors

Reduce price

Maintain lower price

Maintain price

Reduce price further


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EXHIBIT 3.1: DECISION TREE FOR


EL NACHO FOODS
Company
Action

Reduce price

Maintain price

Competitive
Response

Financial
Outcome

Maintain
price

$150,000

Reduce
price further

$110,000

Maintain
price

$175,000

Reduce
price further

$90,000

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DECISION-MAKING PROCESS: DECIDE


Step 4: Identify the Best Alternative

A payoff table:
Displays the alternatives, uncertainties, and
outcomes facing a firm
Includes managements determination of the
probability of an uncertaintys occurrence

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EXHIBIT 3.2: PAYOFF TABLE FOR


EL NACHO FOODS
Uncertainties

Reduce price

Competitors
Maintain Price
(Probability = 0.9)

Competitors
Reduce Price
(Probability = 0.1)

$150,000

$110,000

$175,000

$90,000

Alternatives
Maintain price

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DECISION-MAKING PROCESS: DECIDE


Step 4: Identify the Best Alternative
A payoff table computes the expected
monetary value (EMV) for each alternative
The EMV is calculated as follows:
EMV

(
(

Outcome of
Uncertainty11
Outcome of
Uncertainty22

Probability (p)
of Uncertainty11

Probability (p)
of Uncertainty22

)+
)+

EMVPI = EMV of Perfect Information


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EXHIBIT 3.3: DECISION ANALYSIS AND


THE VALUE OF INFORMATION
Payoff Table Uncertainties
Competitors
Competitors
Maintain Price
Reduce Price
(Probability = 0.9) (Probability = 0.1)
A1: Reduce price

EMV
Calculation

$150,000

$110,000

$146,000

$175,000

$90,000

$166,500

Alternatives
A2: Maintain price

EMVA1 = (0.9 $150,000) + (0.1 $110,000) = $146,000


EMVA2 = (0.9 $175,000) + (0.1 $90,000) = $166,500
EMVCertainty = (0.9 $175,000) + (0.1 $110,000) = $168,500
EMVPI = EMVCertainty EMVBest alternative
EMVPI = $168,500 $166,500) = $2,000
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DECISION-MAKING PROCESS: DECIDE


Step 4: Identify the Best Alternative

Decision analysis is important because it:

Is a fundamental tool for considering


what if situations

Forces the manager to quantify outcomes


associated with specific actions

Is useful in a variety of settings

Can be used in determining the value of


perfect information
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DECISION-MAKING PROCESS: DECIDE


Step 5: Develop a Plan for Implementing
the Chosen Alternative

An implementation plan involves:


Allocating marketing, financial, and
manufacturing resources
The time needed to develop a
marketing plan
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DECISION-MAKING PROCESS: DECIDE


Step 6: Evaluate the Decision and the Decision Process

With respect to the decision itself, ask:

Was a decision made?

Was the decision proper given the situation?


Insufficient information present?
Failure to consider and interpret relevant information?
Logical assumptions made regarding data gaps?
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DECISION-MAKING PROCESS: DECIDE


Step 6: Evaluate the Decision and the Decision Process
Ask 5 questions of the decision-making process:
1. Was the problem defined adequately?
2. Were all the pertinent alternatives and uncertainties
identified? Were the assumptions realistic?
3. Was all the relevant information considered?
4. Was an appropriate course of action recommended? Was
the logic consistent? Was any important piece of
information overlooked?
5. How can the recommendation be implemented?
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CHAPTER 3: MARKETING DECISION


MAKING AND CASE ANALYSIS

PREPARING AND
PRESENTING
A CASE ANALYSIS

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PREPARING AND PRESENTING


A CASE ANALYSIS
Approaching the Case

First reading. Become familiar with the


situation of the organization:
Identify insights into the problem
Obtain background information on the
environment and organization
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PREPARING AND PRESENTING


A CASE ANALYSIS
Approaching the Case

Second reading. Pay attention to key


facts and assumptions:
Determine relevance and reliability of
the data
Obtain background information on
the environment and organization
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PREPARING AND PRESENTING


A CASE ANALYSIS
Approaching the Case

Avoid these pitfalls:


Do not rush to a conclusion
Do not work the numbers until their
meaning and derivation are understood
Do not confuse supposition with fact
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EXHIBIT 3.4a: MARKETING CASE


ANALYSIS WORKSHEET
Formulating the Case Analysis
1. What is the nature of the industry
structure, conduct, and performance?

Nature of the
Industry,
Market, and
Buyer
Behavior

2. Who are the competitors, and what are


their strengths and weaknesses?
3. How do consumers buy (why, where,
when, how) in this industry or market?
4. Can the market be segmented? How?
Can the segments be quantified?
5. What are the requirements for success
in this industry?
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EXHIBIT 3.4b: MARKETING CASE


ANALYSIS WORKSHEET
Formulating the Case Analysis
1. What are the organizations mission,
objectives, and distinctive competency?
2. What is its offering to the market? How
can its past and present performance be
characterized? What is its potential?

The
Organization

3. What is the situation in which the manager


or organization finds itself?
4. What factors have contributed to the present
situation?
5. What are its financial, human, and material
resources?
6. What is the fit between it and its
environment based on the SWOT?

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EXHIBIT 3.4c: MARKETING CASE


ANALYSIS WORKSHEET
Formulating the Case Analysis
1. What actions are available to the
firm based on the situation analysis?

A Plan
of Action

2. What are the costs and benefits


of action in both qualitative and
quantitative terms?
3. Is there a disparity between what the
organization wants to do, should do,
can do, and must do?

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EXHIBIT 3.4d: MARKETING CASE


ANALYSIS WORKSHEET
Formulating the Case Analysis

Potential
Outcomes

1. What will be the buyer, trade, and


competitive response to each course
of action?
2. How will each course of action satisfy
buyer, trade, and organization
requirements?
3. What is the potential profitability of
each course of action?
4. Will the action enhance or reduce the
organizations ability to compete in the
future?
5. What is the best course of action to
pursue?
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PREPARING AND PRESENTING


A CASE ANALYSIS
Formulating the Case Analysis

If using teams:
Create a balanced team whose members
skill sets complement one another (writing,
oral presentation, financial, etc.)
Be committed to the task and dependable
Avoid groupthink
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COMMUNICATING THE CASE


ANALYSIS
Class Discussion
Case preparation requires 4-5 hours
Bring notes to class
Carefully listen to the viewpoints of other
students during the discussion of the case
Prepare a short summary of the case after
discussing it in class
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COMMUNICATING THE CASE


ANALYSIS
Oral Presentation
Rehearse the presentation
Visual aids do not replace the oral
presentation
Do not read slides to the audience
Do not use too many graphics, colors,
and transitions
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COMMUNICATING THE CASE


ANALYSIS
Oral Presentation
Slides should cover the following:
Presentation title and presenters names
Outline of the presentation
Key problems and strategic issues that
management needs to address
Analysis of the organizations situation or problem
Recommendations and supporting reasoning
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COMMUNICATING THE CASE


ANALYSIS
Written Report
Be carefully organized and
grammatically correct
Has three major sections:
Strategic problem and issue identification
Analysis and evaluation
Recommendations
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mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.

2013 Pearson Education, Inc. publishing as Prentice Hall

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