Decision-Making Techniques

1⃣ What are Decision-Making Techniques?

• Definition: Structured methods that help businesses evaluate options and make strategic decisions.

2⃣ What are the main Decision-Making Techniques?

1. Decision Trees

2. Critical Path Analysis (CPA)

3. Force Field Analysis

4. Cost-Benefit Analysis

5. SWOT Analysis

6. PESTLE Analysis

3⃣ What is a Decision Tree?

• Definition: A visual diagram that maps out the different options, outcomes, probabilities, and financial impacts of a business decision.

4⃣ What are the key components of a Decision Tree?

1. Decision Nodes (Square): Points where a decision must be made.

2. Chance Nodes (Circle): Points of uncertainty with different possible outcomes.

3. Branches: Represent the different options available.

4. Expected Monetary Value (EMV): Calculated for each option to determine the best choice.

5⃣ How is Expected Monetary Value (EMV) calculated?

EMV=∑(Probability×Payoff)EMV = \sum (Probability \times Payoff)EMV=∑(Probability×Payoff)

• Add up the weighted values of each possible outcome.

6⃣ What are the advantages of Decision Trees?

1. Visual representation of complex decisions.

2. Quantitative evaluation of options.

3. Helps compare risk vs. reward.

4. Encourages thorough analysis.

7⃣ What are the disadvantages of Decision Trees?

1. Relies on accurate data and probabilities.

2. Does not consider qualitative factors.

3. Can become overly complex with many branches.

4. Assumes probabilities are constant, which may not be true.

8⃣ What is Critical Path Analysis (CPA)?

• Definition: A project management tool that outlines the sequence of activities needed to complete a project, identifying the longest path (critical path).

9⃣ What are the key components of CPA?

1. Nodes: Represent the start and end of activities.

2. Activities: Represented by arrows between nodes.

3. Earliest Start Time (EST): The earliest time an activity can start.

4. Latest Finish Time (LFT): The latest time an activity can finish without delaying the project.

🔟 How is the Critical Path determined?

• By identifying the path through the project that takes the longest time. Any delay in these activities will delay the entire project.

1⃣1⃣ What are the advantages of CPA?

1. Highlights bottlenecks and dependencies.

2. Helps allocate resources efficiently.

3. Identifies float time for non-critical activities.

4. Improves project time management.

1⃣2⃣ What are the disadvantages of CPA?

1. Assumes accurate time estimates.

2. Does not account for cost or resource availability.

3. Can be overly complex for large projects.

4. External risks like weather or supplier delays are not included.

1⃣3⃣ What is Force Field Analysis?

• Definition: A tool used to analyze the forces for and against a change or decision.

1⃣4⃣ How is Force Field Analysis structured?

1. Driving Forces: Push towards change (e.g., market demand, cost savings).

2. Restraining Forces: Resist change (e.g., employee resistance, high costs).

3. Each force is given a weight to assess its impact.

1⃣5⃣ What are the advantages of Force Field Analysis?

1. Clear visual representation of pros and cons.

2. Helps identify barriers to change.

3. Allows for strategic planning to overcome obstacles.

1⃣6⃣ What are the disadvantages of Force Field Analysis?

1. Subjective weighting of forces.

2. Ignores the time element of changes.

3. May oversimplify complex situations.

1⃣7⃣ What is Cost-Benefit Analysis (CBA)?

• Definition: A financial evaluation of the costs and benefits of a project or decision.

1⃣8⃣ How is Cost-Benefit Analysis calculated?

Net Benefit=Total Benefits−Total CostsNet \ Benefit = Total \ Benefits - Total \ CostsNet Benefit=Total Benefits−Total Costs

• If Net Benefit > 0, the project is financially viable.

1⃣9⃣ What are the advantages of Cost-Benefit Analysis?

1. Simple method to evaluate profitability.

2. Quantifies both costs and benefits.

3. Helps in budget allocation.

2⃣0⃣ What are the disadvantages of Cost-Benefit Analysis?

1. Hard to quantify intangible benefits.

2. May overlook external costs (e.g., environmental damage).

3. Ignores the time value of money if not discounted.

2⃣1⃣ What is SWOT Analysis?

• Definition: A strategic planning tool used to identify a business's Strengths, Weaknesses, Opportunities, and Threats.

2⃣2⃣ How is SWOT Analysis structured?

1. Strengths: Internal capabilities that give an advantage.

2. Weaknesses: Internal limitations that could hinder objectives.

3. Opportunities: External chances to improve performance.

4. Threats: External factors that could cause trouble.

2⃣3⃣ What is PESTLE Analysis?

• Definition: A strategic framework for analyzing the external macro-environment of a business.

• Factors include: Political, Economic, Social, Technological, Legal, Environmental.

2⃣4⃣ When is PESTLE Analysis used?

1. For market entry decisions.

2. To evaluate external risks.

3. During strategic planning for expansion or diversification.

2⃣5⃣ Key Exam Tip:

• When analyzing decision-making techniques in exams:

  • Link back to the case study.

  • Show both quantitative and qualitative evaluation.

  • Recommend the most feasible option based on the analysis.