Decision Making and Case Analysis

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2 . along with a variety of communication skills.Objective Objectives of this chapter is   Introduce a systematic process for decision making Introduce basic considerations in case analysis Many companies today use case study when interviewing applicants to assess his or her decision making skills. analytical ability and judgment. including listening. and dealing with confrontation. questioning. They have found that the applicant’s approach to the case demonstrates strategic thinking.

Develop a plan for implementing a chosen alternative E.Identify the best alternative D. The decision making process described here is called . use of a systematic decision-making process can increase the likelihood of arriving at better solutions.Define the problem E.Enumerate the decision factor C .Evaluate the decision and the decision process 3 .DECIDE D.Decision making process Although no simple formula exists that can assure a correct solution to all problems at all times.Consider relevant information I .

The firm lost market share and sales as a result of these price reduction. The company had positioned the line of Mexican foods as a high quality brand and used advertising effectively to convey the message.Problem well defined is half solved Consider the situation faced by EI Nacho Foods. this loss led to reduction in contribution dollar available for sales promotions and marketing.  How might the problem be defined in this situation?   One definition of the problem leads to the question: Should we reduce our price? A much better definition the problem leads one to ask: How can we maintain our quality brand image (objective) and regain our market share (success measure). 4 . Shortly after the company’s introduction of frozen dinner. the competitors started lowering the price of their frozen dinner. given limited funds for advertising and sales promotion ( constrains). a marketer of Mexican Foods.Define the Problem Remember.

D.Define the Problem  The first problem definition asks for a response to an immediate issue facing the company  It does not articulate the broader and more important considerations of competitive positioning. hence it fails to capture the significant of the issue raised  The second definition provides a broader perspective on the immediate issue posed and allows the manager greater latitude in seeking solutions 5 .

Enumerate the Decision Factors Two sets of decision factors must be enumerated in the decision making process 1. 2. 1. Alternatives are typically product market strategies or changes in the various element of the marketing mix 2.E.   Alternate course of action Uncertainties in the competitive environment Alternate course of action: Alternate course of action are controllable decision factors because the decision maker has complete command of them.  Uncertainties in the competitive environment Uncertainties on the hand are uncontrollable factors that the manger can not influence such as    Competitors Market size Buyers response to marketing action 6 .

characteristics of the organization ( such as competitive strength and position). analyzing many and varied cases is one way to acquire this skill Two notes of caution:  Case analyst must resist the temptation of considering all information as facts and part of the task in any case is to asses the validity of the information   In many instances relevant information has to be created It should be clear that at this point that though this is a third step in decision making process but it might affect the earlier two steps 7 . and characteristics of the alternatives themselves   There is frequently an overabundance of information in the form of facts and figures and viewpoints Determining what matters and what doesn’t is a very essential skill that managers must acquire.C-Consider Relevant Information The third step in the decision making process is the consideration of relevant information  Relevant information might include characteristics of the industry or competitive environment .

I.Identify the Best Alternative   Identifying the best alternative is the fourth step in the decision making process The selection of a course of action is not simply choosing alternative A over other alternative but rather. uncertainties and potential outcomes. uncertainties and potential outcomes . of evaluating identified alternatives and the uncertainties apparent in the problem setting  Managers implicitly use a decision tree and a payoff table to describe the relationship among alternatives.  The use of decision analysis and the application of decision tree and payoff tables to describe the relationship among alternatives.  Suppose that at the conclusion of step 2 in the DECIDE process (that is enumerating the decision fcators). EI Nacho executives identified two alternatives 1) Reduce price of frozen dinners 2) Maintain the price  They also identified two uncertainties 1) Competition could maintain the lower price 2) Competition could reduce the price further 8 .

I.Identify the Best Alternative cont……  Suppose further that at the conclusion of step 3 in the DECIDE process ( considering relevant information). EI Nacho executives examined the changes in market share and sales volume that would be brought about by 9 .

Identify the Best Alternative cont…… 10 .I.

 Payoff table allows the manager or case analyst to compute the expected monetary value for each alternative..Identify the Best Alternative cont…. The expected monetary value is calculated by multiplying the outcome for each uncertainty by its probability of occurrence and then totaling across the uncertainties for each alternatives 11 .I.

000)+0.000 Maintain price EMV A2= 0.000)+0..500 Calculation of Expected Monitory Value of Perfect Information (EMVPI) EMV certainty= 0.$ 166.000)=$ 166.1($90.500 = $ 2000 EMPVI is the difference b/w what EI Nacho Food would achieve in contribution dollars if its management 12 knew for certain what competitors would do and the avg.1($110.000)=$ 168. This exhibit shows how expected monetary value of perfect information EMPVI can be calculated Calculation of Expected Monitory Value (EMV) Reduced price EMV A1= 0.1($110.Identify the Best Alternative cont….500 EMVPI= EMV certainty _ EMV best alternative EMVPI= $ 168.I.9($175.500 .000)=$ 146.000)+0.9($175. contribution dollars realized without such information. .9($150.

and manufacturing resources will be allocated for the course of action. and planning for it forces the case analyst to consider resource allocation and timing questions.  If a price reduction is recommended.  For example if a new product launch is recommended.   Timing is crucial as marketing plan takes time to develop and implement As a final note it is important to recognize that the strategy formulation and its implementation are not necessarily separate sequential process 13 .Develop a Plan for Implementing the Chosen Alternative   The selection of course of action must be followed by a plan for implementation. it is important to ensure that the price reductions and reaching the final consumer and not absorbed by the resellers in the marketing and distribution channel.D. financial. it is important to consider how managerial. The execution phase is critical and.

1. Was the decision appropriate. in that case.E – Evaluate the Decision and Decision Process  The last step in the DECIDE process is the evaluation of decisions made and the decision process it self  1. given the situation identified in the case setting? This question is about insufficient information on one hand and failure to consider and interpret information on the other. two questions should be asked Was a decision made? This is a common short coming where the analyst do not make a decision but just talks about the situation facing the organization. assumptions are made. WRT decision itself.   Assumptions must be made with proper logic and articulation Assumptions should never be made casually and for the sake of making them 14 .  Some times information required to make a decision is not available.

was my logic consistent with the recommendation? If not. critically examine these questions:    Did I define the problem adequately? Did I define all pertinent alternatives and uncertainties? Were my assumptions realistic? Did I consider all information relevant to the case  Did I recommend an appropriate course of action? If so. . were my assumptions different fro assumptions made by others? Did I overlook an important part of information?  Did I consider how many recommendation could be implemented?  Honest answer to these questions will improve the chances of making better15 decisions in the future.E – Evaluate the Decision and Decision Process con…  The case analyst should constantly monitor how he/she applies the decision making process  The mere fact that the decision was right do not suggest that the decision process was right.  After completing the class discussion/case assignment in real life.