How to Make Important Business Decisions - Essay Example

It is time to find out the people or place from where the information can be collected. Thereafter, the information can be collected. At the next stage, the fears, expectations, merits, and limits in each point of view are analyzed (Stages in decision making).

An assumption can be considered as a statement that one considers as true but without any concrete evidence to support it. In the business world, it is necessary for companies to make assumptions in a number of different situations. For example, companies will make assumptions on the amount of pension that will be paid to the retirees in the future as a part of making financial statements. In addition, we make many assumptions in everyday life too. For example, one driving on the road assumes that all other drivers will obey traffic rules and that all will stop at a red light. As Adamson (2010) points out, there are many other common assumptions made by companies in their day-to-day functioning. For example, one company assumes that the economic situation will be back to normal soon. Another might assume that the changes in the market are temporary. In addition, another company assumes that what their clients want is product A. Another assumption is that the company has to invest in the field. Also, one can see many companies boasting that no other company can beat them in product Y (Adamson, 2010).

However, the fact is that these assumptions are not absolute and in case of their failure, they will have a huge impact on the future of any company. For example, these primary assumptions will be followed by a number of secondary assumptions that will move further away from reality. So, it is necessary to have an assumption testing system in the company. Some common methods that can be used to verify the validity of an assumption are communication with the customers or prospects, formal market research, internal surveys, competitive research, secret observation, and consulting experts. In fact, the importance of communicating with experts is identified by Janis (2011, p. 24)  in an analysis of the failure of the Bay of Pigs invasion. 

As far as the first assumption that the demand for SUVs would continue as the gas price would continue to rise, it is necessary to analyze the situation. First of all, through stakeholders, one should identify the possible change in the price of gas, and if using SUV is economically more viable than using gas. For the purpose, it is necessary to identify the various stakeholders involved. Their opinions should be collected individually and can be collated. In case of different opinions, it is necessary to have a debate on the issue (Strategic Assumption Testing).

In the second example, in order to check if people would love an airline that provides no added amenities, it is necessary to identify the stakeholders, that is, passengers of various economic levels, and identify their preferences. Thus, one can say that it is necessary to identify and analyze stakeholder opinion to scrutinize the credibility of assumptions