RIFT VALLY UNIVERSITY

MBA PROGRAM

Quantitative Analysis for Business Decisions

Name of the instructor: Bersisa Kacho (PhD)

Email: fenetwada@gmail.com
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 Chapter 1
Introduction to Management Science

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 1.1. Overview of Management Science

 The scientific management revolution of the early 1900s initiated by F.

W. Taylor provided the foundation for the use of quantitative methods
in management/modern management science.
 Modern management science research is generally considered to have
originated during the World War II.
o At this period, teams were formed to deal with strategic and
tactical problems faced by the military. That is teams, which often
consisted of people with diverse specialties (e.g., mathematicians,
engineers, and behavioral scientists), were joined together to solve
a common problem by utilizing the scientific method. 1-3
 Overview of Management Science… cont’d

 Researches were conducted using numerous methodological

developments during the post World War II . These has led to the
growth and use of management science in non-military
applications
 The most significant development was the discovery by George
Dantzig, in 1947 of the simplex method for solving linear
programming problems.

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 Overview of Management Science… cont’d

Management science:

Uses a scientific approach to solving management problems.

Is used in a variety of organizations to solve many different

types of problems.

Encompasses a logical mathematical approach to problem

solving.

Also known as operations research, quantitative methods, etc.,

involves a philosophy of problem solving in a logical manner.
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 Overview of Management Science… cont’d

 It is a scientific method to solve management problems in order

to help managers to make better decision.
 It encompasses a number of mathematically oriented
techniques that have been developed within the field of
management science.

 It can be applied to some problems in a variety of different types

of organizations including government, military, business and
health care institutions, etc.

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 Overview of Management Science… cont’d

Problem solving: can be defined as the process of identifying a

difference between the actual and the desired state of affairs and
then taking action to resolve the difference. For justification and
careful analysis of problem, the problem solving process involves the
following seven steps:
1. Identify and define the problem
2. Determine the set of alternative solutions;
3. Determine the criterion or criteria that will be used to
evaluate the alternatives;
4. Evaluate the alternatives;
5. Choose an alternative;
6. Implement the selected alternative, and
7. Evaluate the results to determine whether a satisfactory
solution has been obtained 1-7
 Overview of Management Science… cont’d

Decision making: is the process of identifying, analyzing and

choosing the best alternative from many analyzed alternatives to
implement it.

 If there is no alternative, then there is no need to worry about

decision-making.
 It is the term generally associated with the first five steps of the
problem solving process.
 Thus, the first step of decision making is to identify and define
the problem.
 Decision making ends with the choosing of an alternative, which
is the act of making the decision.

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 1.2. Management Science Approach to Problem Solving

 The management science approach follows a generally

recognized ordered set of steps of the following:

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 1.2. Management Science Approach to …cont’d

1. Observation
 The first step in the application of quantitative management
approach is the identification of problem that exists in the
system of the organization.
 The system must be continuously and closely observed so that
problems can be identified as soon as they occur or are
anticipated.
 The problems are most of the time identified by a management
scientist, a person skilled in the techniques of management
approach and trained to identify problems.

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 1.2. Management Science Approach to …cont’d

2. Definition of the Problem

 Once the problem has been identified, it must be clearly and
concisely defined.

3. Model Construction 
 A management model is an abstract representation of an
existing problem situation.
 It can be in the form of a graph or a chart, but most
frequently it consists of a set of mathematical relationships
that are made up of numbers and symbols
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 1.2. Management Science Approach to …cont’d

4. Model solution/problem solution

 Once models have been constructed in management
science, they are solved using the management science
techniques.
 When we refer to model solution, we also mean problem
solution.

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 1.2. Management Science Approach to …cont’d

5. Implementation of the Decision 

The quantitative approach provides information that can aid the

management in decision making.
 In making the ultimate decision, the manager must combine the
information obtained with his/ her own expertise and experiences.
If the manager does not use the information derived from the management
technique, the results are not implemented.
If the results are not implemented, the effort and resources that went in to
problem definition, model construction and solution are unnecessarily
wasted.
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 1.3. Management Science Techniques
  The management science deals with many techniques that can
help managers to make decision in certainty and uncertainty
conditions.
 A technique that assumes certainty in its solution is referred to
as deterministic.
 The decisions that can be made on certainty conditions depend
on experience and past data of the organization.

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 1.3. Management Science Techniques…cont’d

In this condition, different types of mathematical programming

techniques can be used for making decision when the existing data
become difficult to manually compute.
 The mathematical programming techniques assume that all parameters in
the model are known with certainty.

 Therefore, the solution results are assumed to be known with the

certainty, with no probability

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 1.3. Management Science Techniques…cont’d

The decisions under uncertainty conditions are made with the

different degree of decision maker´s optimism.

Decisions under risk conditions are made with the use of

probabilistic techniques with some possibility that alternative
solutions might exist.

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