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  • Subject Name : Business Decision Analysis

Table of Contents

Introduction.

Decision Model Proposal

Rational decision-making model

Intuitive Decision-making model

Decision Model Application.

Conclusion.

References.

Introduction

Business decision refers to the regular operations related opinions that are necessary for the profitability of the business. To manage risk in the business or retain customers, business decision management is necessary (Spetzler, Winter and Meyer 2016). For effective operations and management of the business, decision analysis is necessary that explains the process of making appropriate decisions in the organization. The involvement of long term and short term benefits provide numerous alternatives and options to figure out the business complexities. Money is the value of business decision analysis which concentrates on the optimal choice of resources. Decision analysis is used for complex decisions in the organization such as planning and investing (Leeand Shin 2018).

Strategic business decisions are based on the qualitative, visual, and systematic approach of the organization which uses a wide range of tools in the management. Knowledge of the organization is an outcome of the decision analysis. It is based on the specific business model. Different business decision-making techniques are available through a specific business decision model. This research aims at analyzing specific business decision models for the industry and their problems. An organization can use multiple decision models at different stages to maintain its efficiency and promote effectiveness in the organization (Spetzler, Winter and Meyer 2016).

Decision Model Proposal

The decision model refers to the framework which provides a fact-based conclusion to present the business logic which is intended by the organization and provides a suitable business decision. Four decision-making models are popular in the organizations to propose specific decisions in the businesses and approach towards the management functions (Lombardi, Milano, and Bartolini 2017). The right approach in the business is necessary to promote the desired results and maintain effective operations. The motivation of the decision-maker enhances that proposes experience to take necessary decisions.

The Decision-making process includes identification of decisions, gathering appropriate information, analyze the alternatives, weigh evidence, select an appropriate alternative, take necessary action, and review the decisions. Each industry works towards an effective decision model for the most suitable alternatives. Strategic, operational, and tactical decisions are based on the organizational function which represents POLC (Planning, organizing, leading, and controlling) model. For the manufacturing and management industries, several business decision models are popular. These models are based on the analysis of the specific problem and its alternatives (Luhmann 2018).

Rational Decision-Making Model

A rational decision-making model is based on the classic decision-making models which represent eight steps to establish a criterion for optimal decision making. Manufacturing industries can apply this model for optimum decisions and evaluating the best choices. This model can help in identifying several opportunities that can be achieved by the best standards use. The defined criteria of this model represent the available alternatives rather than just opting for a 'good enough' decision which is safe for the organization (Abubakar, Elrehail, Alatailatand Elçi 2019).

Rational decision-making model

Figure 1: Rational decision-making model

Source: https://www.researchgate.net/figure/The-Rational-Decision-making-Model_fig1_235302990

The rational decision-making model represents the perfect information that can be derived through alternatives. The cognitive ability of individuals can be evaluated through this model. Its steps are effective for decision making and enhance several solutions that can promote the logical operations of the business (Brunsson and Olsen 2018). Different steps for the organization to manage effective decisions are:

  1. Problem identification: With rational thinking, the defined problem can be identified by the organization to manage suitable solutions. This can be related to the business operations or the managerial functions (Brunsson and Olsen 2018).
  2. Identification of objectives: Suitable objectives can be defined by the organization to manage the problem and provide the needs of the business. These objectives specify the area and goals which are to be covered by the organization and achieved through a specified solution (Brunsson and Olsen 2018).
  3. Search for alternatives: It is the third step of the process that promotes the identification of several alternatives to fulfil the needs of the problems. It can include different opinions, use of theories, feedbacks, and literature. It is necessary for the identification of suitable decisions.
  4. Evaluation of alternatives: Based on the objectives of the organization and identified the problem, suitable alternatives are recognized. These alternatives can be ranked by the organization or define the pathway of the organization.
  5. Select the alternative: The most appropriate alternative is selected by the organization that represents the rational approach of selecting the appropriate solution. It reflects the approach and objectives of the organization to select the best decision (Brunsson and Olsen 2018).
  6. Implementation of the decision: It can be identified that the best solution for the problem is derived which can be implemented by the organization to seek desired results.
  7. Monitor the consequences: The consequences of the solution are monitored and reviewed by the organization which represents a favourable approach in the business. It provides the efficiency of the decision and individual capability of taking suitable decisions and actions.
  8. Repeat the process: The effectiveness of the decision can be identified through the desired outcome. If the decision is identified as inappropriate and resulted in ineffective outcomes, then the process needs to be repeated for the best suitable alternative (Brunsson and Olsen 2018).

Intuitive Decision-Making Model

The intuitive decision-making model represents the frequently used decisions of the managers for the effectiveness of the organization. This model is based on the individuals’ “sixth sense” which provides the situational analysis to proceed with the decision. It is an opposite model of rational decision making as it is purely based on the individual’s experiences and perception (Schwartz 2016). A rational decision-making model is based on the facts and analytics that promotes critical thinking to manage a specific problem. Intuition is based on defined logic and ideas of the individual who proposed decisions. The traditional psychological theory proposes this model which is based on the intuition defined actions rather than logical thinking. It is effective in the sports industry as players can work on the reactions and manage winning rates. The response of an individual is focused on the emotional pattern that works with the conscious process. An instinct or feeling explains the choice regarding the responses (Klein 2015).

Intuitive decision-making model

Figure 2: Intuitive decision-making model

Source: https://toughnickel.com/business/An-overview-of-decision-making-models

An intuitive decision-making model is based on six roles that enhance the cognitive process to use consciousness in the decisions and gain successful outcomes. These roles of intuition can be explained as below:

  • Detect the problem: An individual identifies the problem which needs to be dealt with by the organization or managed through decision making. Detection of the problem is necessary to think about the solution with its effective approach (Schwartz 2016).
  • Learn the patterns of the problem: Different patterns can be identified which can provide a definite solution to the problem. Through reasonable and valid patterns, the defined solution can be recognized which can provide a significant result (Klein 2015).
  • Assemble required data: To understand the problem completely, it is necessary to gather the information from different sources such as an organizational issue that can be identified through different sources such as theoretical, individual or organizational data (Schwartz 2016).
  • Compare and check for appropriate solutions: Through understanding the gathered data, different aspects of comparing and checking solutions are defined. With the analysis and comparison, different opinions are identified which can provide an appropriate and most suitable solution (Klein 2015).
  • Engender the final solution: The defined solution can be analyzed with appropriate data. An appropriate solution is identified by the individual which can provide the best possible solution (Klein 2015).
  • Business vision: It is necessary to manage the business vision which captures the wider solutions. For an organization, a vision provides direction which can effectively be identified with the help of an intuitive decision-making model (Schwartz 2016).

The rational decision-making model and intuitive decision-making models are opposite to each other. The traditional theory of decisions follows an intuitive model that proposes the use of cognition for successful outcomes whereas the rational decision-making model is based on critical thinking to reflect upon different facts and manage valid decisions (Klein 2015).

Decision Model Application

The application of the decision model can be understood through a business situation where a manager must take necessary solutions. Reliable and suitable data can be identified through understanding the business problem (Cascetta, Cartenì, Pagliara, and Montanino 2015).

CAM LTD is facing issues with sales as the rate of revenues and sales are continuously decreasing in the market. The reason behind market failures is not identified by the organization till yet which raises an issue for the stability of the organization. The identification of several sources is necessary to manage its sales and gain business success. The marketing manager is looking for the reasons behind the decrease in sales and also working on solutions to manage the sales.

Through this scenario, we can understand that it is necessary to manage business decisions as it affects the performance of the business. Market failures can result in business ineffectiveness which can raise several issues for the future business performance of the organization.

Key steps of the decision-making model

Figure 3: Key steps of the decision-making model

Source: https://toughnickel.com/business/An-overview-of-decision-making-models

The rational business decision model is appropriate for this scenario as it can help in identifying the problem and work with suitable solutions. The application of rational business decisions model can be seen as below:

Identification of problem: Market failures and decreases in sales

Establishment of decision criteria: The decision needs to be favourable for the organization that promotes forecasting regarding better approaches in the future.

Weigh decision criteria: The criteria as established by the organization are based on effective future conditions. A decision tree can be established for weighing the decisions and managing an appropriate action.

Generate alternatives: Decision tree can help in managing alternatives for the decisions. Different factors affecting the sales are identified which can provide a suitable result to perform an effective decision. Better promotional activities and social media marketing are effective in increasing sales.

Evaluate the alternatives: The identified alternatives must be risk-free and provide significant benefits to the organization by attracting more customers. A decision tree can help in applying different options for the problem.

Decision tree for the business decision

Figure 4: Decision tree for the business decision

Choose the best alternative: The best alternative for the organization is social media marketing and engaging more customers through promotional activities.

Implement the decisions: The decision of the manager can be implemented by working on regression and identifying suitable facts.

Evaluate the decision: Business performance provide the opinion of effectiveness in the business. Evaluation and monitoring are necessary to manage decisions.

This scenario provides an effective understanding of the decision-making model which is necessary for an organization to maintain business outcomes. 

The effectiveness of the decision model is based on forecasting, network distribution, decision tree, and regression (Cascetta, Cartenì, Pagliara, and Montanino 2015). A decision tree represents different options to the solutions which can help in identifying an appropriate solution by analyzing its strengths and weaknesses. Regression analysis helps to understand the data to enhance decision making such as the prediction of sales. Network distribution is based on the supply chain that provides an understanding of the transportation system and storage facilities. It combines business solutions and helps to relate it to the retail network. Forecasting is an effective tool for business decisions that enhance planning, budgeting, and estimating future opportunities. The future options can be identified through the forecasting technique (Cascetta, Cartenì, Pagliara, and Montanino 2015).

Conclusion

It can be concluded that the decision model helps an individual to make decisions through effective tools and techniques. Network distribution, regression, decision tree, and forecasting are some effective tools that can enhance decision making and provide better opportunities for an individual to manage the effectiveness of the decisions. This analysis can help in understanding two decision models that are useful for the management, manufacturing, medicine, and sports industry. Traditional organizations follow an intuitive decision-making model approach while modern organizations follow a rational decision-making approach to work through specific facts and figures. Through identifying business decision models, it is effective to promote decision model applications in the organization by analyzing various alternatives. Each decision model has its strengths and limitations which are based on the choice of managers in the organization to proceed with a decision. Students can learn about the application and effectiveness of decision-making models to enhance their decisions.

References

Abubakar, A.M., Elrehail, H., Alatailat, M.A. and Elçi, A. 2019. Knowledge management, decision-making style and organizational performance. Journal of Innovation & Knowledge, 4(2), pp.104-114.

Brunsson, N. and Olsen, J.P. 2018. The Reforming organization: making sense of administrative change. Routledge: New York.

Cascetta, E., Cartenì, A., Pagliara, F. and Montanino, M. 2015. A new look at planning and designing transportation systems: A decision-making model based on cognitive rationality, stakeholder engagement and quantitative methods. Transport Policy, 38, pp.27-39.

Klein, G. 2015. A naturalistic decision making perspective on studying intuitive decision making. Journal of Applied Research in Memory and Cognition, 4(3), pp.164-168.

Lee, I. and Shin, Y. J. 2018. Fintech: Ecosystem, business models, investment decisions, and challenges. Business Horizons, 61(1), pp.35-46.

Lombardi, M., Milano, M. and Bartolini, A. 2017. Empirical decision model learning. Artificial Intelligence, 244, pp.343-367.

Luhmann, N. 2018. Organization and decision. Cambridge University Press: Cambridge.

Schwartz, M. S. 2016. Ethical decision-making theory: An integrated approach. Journal of Business Ethics, 139(4), pp.755-776.

Spetzler, C., Winter, H. and Meyer, J. 2016. Decision quality: Value creation from better business decisions. John Wiley & Sons: US.

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