Creating value and making decisions on complex business problems is crucial in all leadership position whether it is in private enterprises setting and government organizations. Decisions made by leaders are implemented globally throughout the company and have a huge impact on meeting operational goals and successful business continuity.

Identifying a working decision making model plays a key role in figuring out the problem, finding solutions, choosing the best solution and then apply and assessing the solution.

Tough Decisions Ahead

One decision or action affects another, thus making critical thinking of corporate leaders vital to every business transaction; and knowing the mechanics and understanding consequences of their actions are invaluable assets. In response to Samuelson and Marks (2012), Chapter 1, problem #3 on page 22 regarding how a soft drink company can apply the decision making model to introduce a new product into the market. Demonstrated in Figure 1.1 on page 6 as my guideline, the soft drink company can apply the basic six steps as part of their planning and decision making process (Samuelson & Marks, 2012, p.6):

  • Step 1 – Define the Problem: This initial step is identifying the situation and examining the context of the issue and methodically going through the questions related to: who? What? When? Why? and How? Also determine whether soft drink is new, imitation or substitute product inspired by something another beverage already in the market. By defining the problem, management can begin developing a holistic plan inclusive of various conditions and both known and unknown variables that might have an impact on the product demands, production and sales.
  • Step 2 – Determine the Objective: Figuring out the objective or strategic goal is critical, especially in forecasting future profits. In this step, management need to contend with questions related to building brand equity, value creation and whether or not there are attributes that would differentiate the product from its competitors. Additionally, being able determine if the product will align with the company’s existing product or will it satisfy other strategic goals.
  • Step 3 – Explore the Alternatives: The third step is generating solutions. Being able to devise a “plan B” or have on hand an alternative solution is equally important to being able to identify the purpose of the product. Management will have to consider the logistic of product distribution and introduction into the marketplace. In addition to that, the company would have to figure which variety or drink flavor to spotlight, and determines geographically when and where to produce and introduce the drinks; and developing and designing strategic marketing campaigns that will produce the biggest impact.
  • Step 4 – Predict the Consequences: This step aims more on being able to forecast the financial consequences of decisions made or course of actions. In this step of the planning, management is expected to make certain assumptions of their production and profit level and at a determined frequency, i.e. monthly, quarterly, and semi-annual, annually, 3-year plan, 5-year plan, etc. Other assumptions include revisiting and modifying the plan 1, 2, or 3 year after launching the product.
  • Step 5 – Make a Choice: Once the problem has been identified, the objectives are determined, generating solutions and forecasting the future outcome is done, Step 5 involves selecting one or more of the best solution for the product. In this step, management decides which of the possible solutions, predictions and benefits-cost analysis will maximize their ability to profit.
  • Step 6 – Perform Sensitivity Analysis: In the final step of the decision making model, management have to revisit their original plans and make modifications as needed. Strategic plans take on-going maintenance. It has to stay fluid and adaptable.

Decision makers and senior managers apply critical thinking on a daily basis.

Their ability to solve difficult problems and lead the company and staff in the right direction is essential to the viability of the company as well as success in launching new products into the marketplace. Effective and efficient launching of a product such as soft drinks can be achieve successfully provided the managers implement and properly analyze the existing market conditions for risks, threats and opportunities. By completing a thorough analysis of all the conditions and elements that influence operational objectives, the company can make a more calculated decision that is the most appropriate and most effective.

 

Source:  Samuelson, W.F. & Marks, S.G. (2012). Seven examples of Managerial Decisions. Managerial Economics, 7th ed. John Wiley dan Sons, Inc. New York.

Advertisements

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s