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Business Analysis - Lecture 2

The document discusses decision theory, outlining the elements and processes involved in decision making, including diagnosing problems, evaluating alternatives, and selecting the best option. It categorizes decisions into types such as routine, programmed, and non-programmed, and highlights qualitative and quantitative techniques for effective decision-making. Key characteristics of decision making include being goal-oriented, continuous, and requiring the commitment of organizational resources.

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2 views24 pages

Business Analysis - Lecture 2

The document discusses decision theory, outlining the elements and processes involved in decision making, including diagnosing problems, evaluating alternatives, and selecting the best option. It categorizes decisions into types such as routine, programmed, and non-programmed, and highlights qualitative and quantitative techniques for effective decision-making. Key characteristics of decision making include being goal-oriented, continuous, and requiring the commitment of organizational resources.

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Business Analysis

Dr. Wael Fathy


Chapter 1

Decision Theory
1.Decision:

Choosing an alternative from several available


alternatives in order to achieve a specific goal.

2.Elements of the decision:

• the existence of alternatives.


• Freedom of choice.
• The existence of a goal.
3.Decision making:

The totality of procedures related to diagnosing


the problem or situation, collecting data,
developing alternatives, and then evaluating them
and recommending the best alternatives.

‫مجمل اإلجراءات المرتبطة بتشخيص المشكلة أو الموقف وجمع البيانات وتطوير بدائل ومن ثم تقييمها‬
.‫والتوصية بأفضل البدائل‬
4.Decision making process:

• Determining the situation: ‫تحديد المشكلة‬


the existence of a problem or an opportunity.
• Diagnosis and analysis of causes (data
collection and analysis): ‫جمع البيانات وتحليلها‬
the causes of the problem or features of the
opportunity.
• Developing and evaluating alternatives
(potential solutions): ‫وضع بدائل وتقييمها والتوصية بأفضل‬
‫بديل‬
options for solving the problem or seizing
opportunities.
5.Decision taking:

• The process by which one of the alternatives (the


appropriate alternative) is selected from among a
group of available alternatives, on scientific and
objective bases, and within the principles of the
organization, and its agreed standards, meaning
the evaluation of alternatives and the selection,
implementation and evaluation of the optimal
alternative.

،‫العملية التي يتم بمقتضاها اختيار أحد البدائل (البديل المناسب) من بين مجموعة من البدائل المتاحة‬ •
َّ ‫ وضمن مبادئ ال ُمن‬،‫ وموضوعيّة‬،‫سسٍ ِعلميّة‬
‫ بمعنى تقييم البدائل‬،‫ ومعاييرها ال ُمتَّفق عليها‬،‫ظمة‬ ُ ُ ‫على أ‬
.‫واختيار البديل األمثل وتنفيذه وتقييمه‬
Decision taking:
Meaning:

• A Decision making refers to the process of


selecting the best alternatives course of action,
from among various alternatives available to
management through evaluation of each
alternative.

‫ من بين البدائل المختلفة المتاحة لإلدارة‬، ‫يشير اتخاذ القرار إلى عملية اختيار أفضل مسار عمل للبدائل‬ •
.‫من خالل تقييم كل بديل‬
6.Decision taking process:

• Choosing the appropriate alternative:


Assuming a specific solution after evaluating the
alternatives.‫اختيار البديل المناسب‬
• Implementation of the chosen solution:
use of management capabilities for the chosen
solution. .‫تنفيذ الحل الذي تم اختياره‬
• Evaluation and feedback:
collecting and evaluating information about the
implementation process‫تقييم والتغذية العكسية‬
Approving the implementation and making
corrections:
Acknowledging the validity of the decision or
amending it (assessing the results of
implementation).‫اقرار التنفيذ وإجراء تصحيحات‬
The stages in general:
Problem - Diagnose and analyze the problem -
Set possible alternatives - Choose the
appropriate alternative - Implement this
alternative (I make the decision) - Evaluate this
alternative - Ensure that the decision is correct
or not - Correct deviations.
7. Characteristics of Decision making:
1-Goal oriented.
2- Involves choice.
3- Continuous process.
4- Mind exercise.
5- Dynamic.
6-Situation.
7- Commitment of organizational resources.
8.Types of Decisions: ‫أنواع القرارات‬
1- Routine and strategic Decision.
2-programmed and Non-programmed decisions.
3- Individual and group decisions.

1.Decision may be minor (routine) decision or


they may be important for us (major decision).

2.for Example: decision to buy a candy may be a


routine decision without you being aware of that,
but decision to purchase a house is a major
decision and thus, should be taken in a planned
manner.
Types of Decisions ‫أنواع القرارات‬
1- Routine and strategic Decision:
Tactical or routine decision are concerned with
routine or repetitive, problems they neither
require collection of new data nor conferring with
people.
:‫ القرار الروتيني واالستراتيجي‬-1
‫ وهي المشاكل التي ال تتطلب جمع بيانات جديدة وال‬، ‫يتعلق القرار التكتيكي أو الروتيني بالروتينية أو المتكررة‬
.‫التشاور مع الناس‬
2-programmed and Non-programmed decisions:–
The programmed decisions are of a routine and
repetitive nature which are to be dealt with
according to specific procedure, a sequence of
steps can be laid in advance so that the
decisions become highly, strutted.
They are called programmed because information
on them is available and have a short term
impact, thus they are entrusted to lower levels
of management.
Ready- made solutions for repetitive problems.
for instance , if an employee absents himself
from work for a long period of time without
intimation, the supervisor can deal with such
situation according to standard procedure without
consulting the chief executive, on the other hand
non-programmed decisions arise because of
unstructured problems these, are concerned with
novel or non-repetitive issues
there is no standard procedure for dealing with
such problems since, readymade decisions are not
available and high degree of precision is
required, so they are generally made by top level
of management . for instance , if large number
of employees absent themselves from work for a
long period of time without intimation, the
supervisor cannot deal with such situation without
consulting the chief executive The scenario
depicts and unstructured problem which can be
solved in the light of scientific analysis of
situation factors, and requires the involvement of
top officials.
1-Identify the problem:–
1- ‫تحديد المشكلة‬: -
2- Diagnose the problem:-
2- ‫تشخيص المشكلة‬: -
3- Discover alternatives:–
3- ‫اكتشف البدائل‬: -
4- Evaluate alternatives:-
4- ‫تقييم البدائل‬: -
5- Select the best alternative:- ‫حدد البديل األفضل‬
6- Implementation and follow up ‫التنفيذ والمتابعة‬
Decision Making Techniques

At the end of this section the students should


be able to:

•Qualitative techniques.
•Quantitative techniques.
Decision -making: Techniques and support system
The process of managerial decision making has
become very cumbersome in the highly turbulent
business environment of the present times, in
order to evaluate the alternatives for choosing
the best alternative course, of action , certain
qualitative and qualitative techniques have been
developed which help in making objective
decision, Accordingly, the techniques fall under
two categories:-
Qualitative techniques.
Quantitative techniques.
1- Qualitative techniques:
These techniques are basically traditional in
nature and the quality of decision arrived at
depends upon the qualities of decision maker
himself (i.e, his competence, knowledge etc.).
The prominent techniques of decision making
often used by groups of committees include the
following:
‫•هذه التقنيات هي في األساس تقليدية بطبيعتها وتعتمد جودة القرار الذي يتم التوصل إليه على صفات صانع‬
.)‫القرار نفسه (أي كفاءته ومعرفته وما إلى ذلك‬
:‫•تشمل األساليب البارزة في اتخاذ القرار التي تستخدمها مجموعات اللجان غالبًا ما يلي‬
1- Qualitative techniques:
(a) Experience
(b) Intuition
(c) Mutual consultation
(d) Facts
(e) Standard plans
(f) Delphi technique
(g) Brainstorming
(h) Consensus mapping technique
2-Quantitative / mathematical techniques:
What are the Quantitative Techniques of
Decision Making?
While making a decision there are several
Techniques that a manager of a company or an
organization can employ. Quantitative Techniques
help the manager to take decisions objectively
and in an efficient way. Such Techniques rely on
a scientific and statistical approach to make a
good decision. The important quantitative
Techniques of decision making are as follows:
2-Quantitative / mathematical techniques:
1- Operations Research
2- Probability Decision Theory
3- Cost Analysis or Break-Even Analysis
4- Cost-Benefit Analysis
5- Marginal cost Analysis
6- Network Techniques
7-The Game Theory
8- Simulation
Characteristics of Quantitative Techniques
The quality of the solution can be improved by
quantitative Techniques but it is not necessary
that the solution is perfect. These Techniques
help in finding the solution to the problem.
The quantitative Techniques are related to the
optimization theory. One can find the best
solution to the given situation.
Models are used in quantitative Techniques. By
doing mathematical analysis and experiments, a
good decision can be made.
To perform quantitative Techniques, a group of
people having different skills is required so that
they can estimate the pros and cons of the
solution to the problem. Executives must show a
willingness to participate in the decision-making.
The complexity of the situation gets reduced
when managers use quantitative Techniques to
find an easy solution.
They can even innovate solutions to the most
complicated and costly functions.

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