![]() Payback analysis comes in handy if a manager needs to decide whether to purchase a piece of equipment. It can be used for many situations in which emphasis can be placed on sequential decisions, the probability of various conditions, or the highlighting of alternatives. The various alternatives, based upon possible future environmental conditions, and the payoffs associated with each of the decisions branch from the trunk.ĭecision trees force a manager to be explicit in analyzing conditions associated with future decisions and in determining the outcome of different alternatives. The term decision tree comes from the graphic appearance of the technique that starts with the initial decision shown as the base. Generally, decision trees are used to evaluate decisions under conditions of risk. Decision trees are a useful way to analyze hiring, marketing, investments, equipment purchases, pricing, and similar decisions that involve a progression of smaller decisions. Among the most common techniques are decision trees, payback analysis, and simulations.Ī decision tree shows a complete picture of a potential decision and allows a manager to graph alternative decision paths. These techniques are most commonly used in the rational/logical decision model, but they can apply in any of the other models as well. Quantitative techniques help a manager improve the overall quality of decision making. Personal Challenges for Global Managers. ![]()
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