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Decision Making Tools and Techniques
Decision Making Tools and Techniques
• Problem
– A situation in which some aspect of
organizational performance is less than
desirable.
• Opportunity
– A situation that has the potential to provide
additional beneficial outcomes.
• Programmed decisions
– Decisions made in response to routine
situations that have occurred in the past.
• Nonprogrammed decisions
– Decisions made in response to situations that
are unique, unstructured, or poorly defined.
Programmed Nonprogrammed
decisions decisions
Alternatives are Alternatives are
familiar to decision not familiar to
makers decision makers
Market
Growth
Rate Medium 10%
(Percent)
Cash Cows (III) Dogs (IV)
Low 0%
• Stars
– Businesses that fall into the high market
growth/high market share cell of the BCG
matrix.
• Offer attractive profit and growth opportunities.
• Cash Cows
– Businesses that fall into the low market
growth/high market share cell of a BCG matrix.
• Generate substantial cash surpluses.
• Generally yesterday’s stars that have matured.
• Dogs
– Businesses that fall into the low market
growth/low market share cell of a BCG matrix.
• Typically generate low profits, and in some cases
may even lose money.
• Question Marks
– Businesses that fall into the high market
growth/low market share cell of a BCG matrix.
• Businesses that look attractive from an industry
standpoint, however, their low market share makes
their profit potential uncertain.
© 2001 South-Western Publishing Transparency 7-16
GE Matrix
• Payoff Table
– A matrix that organizes the alternative courses
of action, states of nature, and payoffs for a
decision situation.
• Breakeven Analysis
– A graphic display of the relationship between
volume of output and revenue and costs.
• Linear Programming
– A quantitative program that helps managers
decide how to allocate limited resources among
competing users in a manner that optimizes
some objective.
– Computer programs are available to perform
linear programming analysis.
© 2001 South-Western Publishing Transparency 7-26
Quantitative Decision-Making Aids
Slide 2 of 3
Breakeven Analysis
Total revenue
Loss
Output Volume
© 2001 South-Western Publishing Transparency 7-27
Quantitative Decision-Making Aids
Slide 3 of 3