Reviewing the Decision - Essay Example

Six months ago company "ABC", which for several years had been among our most important s, approached me with the recommendation to place an order for 50 pcs. of fully equipped base cabinets for table-top coffee machines. As you may remember, "ABC" specializes in sales of coffee and soluble products for preparation of hot drinks, and our company is supplying equipment and providing service maintenance for many of the customers of "ABC". In this way, the general amount of equipment sold by our company to the customer network of "ABC" had exceeded 200 pcs.

as of six months ago. On the other hand, along with table-top coffee machines "ABC" had traditionally promoted standard base cabinets which, while being less functional, were 45% cheaper. The reason why the manager of "ABC" with whom we work decided that they would manage to promote fully equipped base cabinets in the future was due to the request of one of their key customers for the immediate installation of 25 pcs. of such advanced base cabinets, plus their reasoning that because of the increased convenience of the more expensive base cabinets the same quantity can be rather quickly installed at other locations as well.

Considering our general positive experience with "ABC", our history of making similar supplies of equipment which "ABC" quickly exhausted, and their leading position in their market segment, I decided to place the order at the manufacturer for the mentioned amount of equipment. After we brought to our stock 50 pcs. of fully equipped base cabinets, it turned out that by then the key customer of "ABC" bailed out from his liability before them, and the general market response to the prospect of purchase of more expensive cabinets was much less enthusiastic than expected.

As the result of the mentioned facts, by this moment we still have on our stock 38 pcs. of fully equipped base cabinets for table-top coffee machines, which translates into 12,500$ of frozen assets. The prospect of the dissolution of the stock can be evaluated as 10-12 months.When I was making the decision about the order of equipment for purchase of which there was no legally binding obligation for purchase from the side of "ABC", I employed several theoretical approaches to decision making.

One of them is the technique of building of decision trees, which represent a structured table or graph of possible decisions and their corresponding expected consequences. As I had some time for making a decision tree before placement of the order, I analyzed the situation with the help of the decision tree and came to the conclusion that the general value of the decision to place the order outweighed the refusal, because there was the prospect of their sale, and the prospect of strengthening cooperation with "ABC".

Another technique which I considered during decision making was "'Plus/ Minus/ Implications" (PMI) analysis, which is a helpful tool to make sure that our decisions would improve the state of affairs. PMI analysis presupposes charting of a table with columns 'plus' (with expected positive results of decision), 'minus' (with expected negative results of decision), and 'implications' (with other possible effects of the action). I believe that the value of this approach is in its ability to show implications of actions, as in my case was the possibility of obtaining experience with the new type of the cabinet.

This consideration also prompted me to make a cost/benefit analysis of my decision, when values of a certain action are added, and costs subtracted. At this point, I reasoned that as we have a three months payment postponement from the manufacturer, even if the rate of sales of equipped cabinets were slower than expected, we would not immediately bear all costs of the decision.Considering the three mentioned theoretical approaches to decision making, I believe that while they all offer very useful insights into contexts of our decisions, people may still be misleaded if they pay more attention to certain aspects of the decisions effects and ignore others.

For example, as I can see now I should have paid more attention to the quantity of the cabinets, because the order of only 25 pcs. would have improved our current situation. Therefore, in the future I will try to find a subtler balance between meeting expectations of our key customers, and down-to-earth economic predictions. SourcesDrucker, P., F., Hammond, J., Keeney, R., Raiffa, H., and Hayashi, A., M. (2001). HarvardBusiness Review on Decision Making. Harvard Business School Press.

Henderson, D., R., and Hooper, C., L. (2005). Making Great Decisions in Business and LifeChicago Park Press.McNamara, C. (1999). Basic Guidelines to Problem Solving and Decision Making. RetrievedFebruary 16, 2006, from http://www.managementhelp.org/prsn_prd/prb_bsc.htmMind Tools Ltd. (2005). Decision Making Techniques. Retrieved February 16, 2006, fromhttp://www.mindtools.com/pages/main/newMN_TED.htm