Significance ofquantitative techniques inthe decision makingprocess

Outline

TODAY'S DISCUSSION

INTRODUCTION

THE IMPORTANCE OF QUANTITATIVE METHODS

THE QUANTITATIVE MODELS

THE DECISION-MAKING PROCESS

CONCLUSIONS

Quantitative approaches are utilized to aid decision-making in almost every facet of daily life.

Managers must apply quantitative methods confidently and reliably to operate effectively in a contemporary businessorganization, whether a private commercial corporation, a government agency, a state industry, or anything else.

Accountants make judgments based on facts about an organization's financial status.

Economists make decisions based on knowledge about the economic environment in which the company works.

Customers' reactions to products and designs are used by marketing personnel to make decisions.

Personnel managers make choices based on facts such as the organization's employee numbers and so on.

Such information is becoming increasingly quantitative, and it is clear that managers want a working understanding ofthe methods and strategies for analyzing and assessing such data.

INTRODUCTION

Such analysis, especially business evaluation, cannot be assigned to a specialized statistician or mathematician,who, while skilled at complex numerical analysis, typically have no overall grasp of the commercial importance ofsuch investigation.

Quantitative methods have several characteristics, including the following:they use measurable data to produce comparable and useful results, assumealternative plans for achieving objectives, plan data collection, configuration,and elaboration using statistical and econometric stochastic methods, checkdata reliability, choose appropriate sampling methods, and use estimatescarefully.

Managers and their supporting information systems must make quick choicesthat are, hopefully, suitable. Finally, the repercussions of making poorjudgments grow more significant and costly, compounding the difficulties.

Organizations will suffer substantial consequences if they enter the incorrectmarkets, produce the wrong products, or provide improper services. All ofthis indicates that anything that might assist an organization's managementin dealing with the demands and challenges of decision-making should beaddressed appropriately.

THE IMPORTANCE OFQUANTITATIVE METHODS

Quantitative approaches give information about a topic or problem and a new way of looking at it that may bebeneficial. Naturally, any quantitative analysis will generate data that must be evaluated and combined withother sources.

Quantitative approaches are used to solve business problems. The procedure revolves around the decisions thatmust be taken.

The chosen organization's strategy in terms of future direction, priorities, and activities will significantly impactthese. Many variables and data must be examined before making a choice.

Techniques can also play an essential part in assisting an option, but they are not adequate in and ofthemselves. Figure 1 shows how this works.

In business, models exist in several shapes and sizes, and they aren't always quantitative. A scale model of a newoffice complex might be built. A financial model could be created to analyze the impact of budget cuts onproduct/service delivery.

The marketing department could create a model to measure customer reaction to product changes.

The adoption of quantitative approaches by managers is motivated by four factors

Models compel managers to state their goals clearly.

Models compel managers to identify and track the many decisions (decision variables) that affect goals.

Models compel managers to recognize and document relevant interactions and trade-offs among decision factors.

Models compel managers to keep track of constraints (limitations) on the possible values of variables.

THE QUANTITATIVE MODELS

Figure 1. The decision making process [1]

Different forms of formal mathematics and other types ofmodels have been implemented in quantitative decision-making issues.

Network analysis, forecasting (regression, route analysis,and time series), cost-benefit analysis, optimization (linearprogramming, assignment, and transportation), sensitivityanalysis, significance testing, simulation, benchmarking,and overall quality management are used by businesses.

The facts, statistics, or quantitative elements of an issueare the focus of quantitative analysis.

The decision-making process is aided by a manager'seducational and technical understanding of quantitativemethods.

A manager who understands quantitative decision-makingmethods is in a far better position to compare and analyzequalitative and quantitative sources of information or tocombine options to make the best judgments feasible.

The following steps are included in the real-world problem-solving process:

Recognize the company's surroundings and unpredictability

The existence of autonomous management units

A holistic approach to real-life circumstances

Scientific Approach Implementation Understanding that the new reality is exogenously provided,irreversible, and moving at a one-way pace is the first step in processing.

While the cost of inactivity may be insurmountably higher than the cost of action today, an open-minded"cost/benefit analysis" overcomes hesitancy and delay and creates synergistic effects over time.

Time plays a crucial role in "competitiveness" in an uncertain environment when the probabilitydistributions of the variables are factored into the study.

THE DECISION MAKING PROCESS

Modern management is increasingly embracing and utilizingquantitative approaches to help in the decision-making process.

The judicious application of the right tools can reduce an otherwisecomplicated problem to a manageable size.

Although there is no such thing as an integrated theory of makingdecisions, the collection of various approaches has been known as"decision theory." However, suppose these approaches are seen asnothing more than a collection of tools occasionally employed totackle specific issues.

In that case, they will have a significant negative influence.

CONCLUSIONS

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