- "Evaluating Alternatives" Phase of the Decision Making Process
- Requires that the evaluative criteria be established
- What are the goals of the analysis?
- Maximize gains, minimize losses, avoid extremes?
- The rules by which objective comparisons can be made
- These vary in terms of the quality of available measurements
- List alternative courses of action to the stated problem
drawing upon available
information that is relevant to that problem
- The overall purpose of the analysis is to select from the listed alternatives
the one
alternative that is "best" by those accepted criteria
- Decision Making as a Process of Resolving Choice Dilemmas
- The simple BEP
- A means of defining "free" choice and by extention defining "forced" choice
- As a special case of the general class of indifference point calculations
- Given its derivation (from the profit equation) BEP defined as:
- Where profit = 0
- The point of fixed cost recovery
- FC/(P-VC)....(note the demoniator is the contribution margin)
- The minimum technical requirement for feasibility
- Fixed profit targets
- Per unit profit targets
- Is generally measured in units but can also be calculated in volumes,
shares
or minimum account size (among other measures)
- Numeric example
- BEP Extended to Multiple Product Lines (A weighted average process)
- Extending the Notion of Indifference to Establish Preferences
Ranges for
Multiple Alternatives
- Non-viable alternatives
- Redundant points of indifference
- Numeric examples
- Conditions for a Choice Dilemma
- Multiple viable alternatives
- Evaluative Criteria
- Changing ranges of preference
- Matrices as a Presentation Format for Choice Dilemmas
- A discreet interval representation of the basic graphic model
- Columns = "States of Nature" (our uncontrollables)
- Must be mutally exclusive of one another
- If not collectively exhaustive,
at least spanning a wide array
of possibilities
- Rows = "Alternatives" (our controllables)
- Representation of Marketing Programs
(complete tactics to
address problem)
- Cells = "Outcomes"
- Profits
- Costs
- Opportunity Losses
- Shaded cells to depict the "line of preference"
- Numeric example
- Matrix extensions to qualitative applications
- The contingency matrix and environmental monitoring
- Moving from a Descriptive
to a Decision Format
- Invoking estimations of likihood (Expected Values)
- The Republic National Bank Case in-class Discussion
- General background and pre-Now Accounts situation
- Market position (Dominant share in terms of size)
- Existing positioning strategy
- Benefits (Image and social contribution)
- Costs (60+% of depositors below BEP)
- Nature of the Now account threat
- Redefines the nature of deposits business
- Monetary value "at risk" with How accounts = $7.5 million
- Setting the RNB Delimma into a Decision Matrix
- Non-viable cells
- Cell analysis
- The extreme scenarios
- Improving the analysis - Loyalty, Inertia,...
- Making lemonade
- Ethical issues
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