Question

Accounting 221

1. Post comments and explain, with examples, how decision making and analysis, with the tools from our course, may be of value to you and your future endeavors.
2. Include specific examples such as a company seeking to increase profits would.

Answer 1

Decision making analysis is structured, systematic and quantitative approach to making strategic business decisions.

Various tools available for the same are-

• SWOT analysis - This is used for strategic planning and decision making. Using SWOT analysis, companies are able to maximize on the strengths of the organization. The weaknesses are considered in order to work upon them and convert into strengths. Available opportunities are considered and strategies to convert them in company's favor are implemented. The organization will also consider possible threats which can be detrimental to their existence and well-being. This is an effective tool as it allows entrepreneurs to analyze the company from all possible angles before taking a decision.
• Feasibility study - Feasibility studies are used for strategic planning of the business. Here, businesses will assess the possibility of creating a specific project and if it can be a profitable proposition. This is among the tools that should be used at the very beginning of launching a new product or service. This will help the company decide if a particular strategy is ideal or feasible for the company or not.

e.g. If an organization has to launch a new product, feasibility study and SWOT analysis shall be conducted in terms of target audience, demand of the product, level of competition, price points of the product, launch area, coverage of the product etc.

• Decision matrix - A decision matrix helps in evaluating all the options of a decision. When using the matrix, a table with all the options is created and all the factors that affect the decision in the net column. Next, each option is scored and weighing of factors which are of more importance is evaluated. A final score is then tallied to reveal which option is the best.
• T-Chart – This chart is used for weighing the pros and cons of the options. It ensures that all the positives and negatives are taken into consideration when making a decision.
• Decision tree – This is a graph or model also known an Flow-chart that involves contemplating each option and the outcomes of each. Statistical analysis is also conducted with this technique.
• Multivoting – This is used when multiple people are involved in making a decision. It helps discard a large list of options to a smaller group to, finally, the eventual decision.
• Pareto analysis – This helps prioritize which ones should be made first by determining which decisions will have the greatest overall impact. It is inclined towards the prioritization in that 20% of the factors that contribute to 80% of the organization’s growth will be given top priority. This will give the decisions that have the highest level of impact top priority
• Cost-benefit analysis – This technique is used for weighing the financial ramifications of each possible alternative. Alternative which makes the most sense from an economic perspective shall be chosen. In other words, time is taken to assess all the costs that will be involved in the decision taken and the benefits that the organization will gain from this. The decisions that will have a greater benefit, in terms of the overall net profits in the organization shall be taken into account.