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CHAPTER 3Marketing Decision Making and Case Analysis

Slide 1-* 2013 Pearson Education, Inc. publishing as Prentice Hall

Describe each step in the decision-making process using the DECIDE method.Prepare and present an analysis of a written case.AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:


DECISION-MAKING PROCESSDecision making is a rational and systematic process and that its organization is a definite sequence of steps, each of them in turn rational and systematic. Peter Drucker


DECISION-MAKING PROCESSCHAPTER 3: MARKETING DECISION MAKING AND CASE ANALYSIS


DECISION-MAKING PROCESS: DECIDEEnumerate the decision factorsConsider relevant informationDefine the problemIdentify the best alternativeDevelop a plan for implementing the chosen alternativeEvaluate the decision and the decision process


DECISION-MAKING PROCESS: DECIDEA problem well defined is half solved. John DeweyProblem definition framework includes:Step 1: Define the Problem


DECISION-MAKING PROCESS: DECIDETwo decision factors to be enumerated and related to each other:Step 2: Enumerate the Decision Factors


DECISION-MAKING PROCESS: DECIDERelevant information consists of information that relates to the alternatives identified by the manager as being likely to affect future events. Includes characteristics of the following:ConsumersCompetitorsIndustryOrganization (competitive strengths and position)AlternativesStep 3: Consider Relevant Information


DECISION-MAKING PROCESS: DECIDEIdentifying relevant information is difficult:There is often too much info and viewpointsDetermining what does and does not matter is a skill learned through experienceDont consider everything as factual infoSometimes relevant info must be createdA manager has performed a situation analysis when steps 1 through 3 are completedStep 3: Consider Relevant Information


DECISION-MAKING PROCESS: DECIDEUses a decision tree and a payoff table to show the relationship among alternatives, uncertainties, and potential outcomesMatches each alternative with the uncertainties in the environmentAssigns a quantitative value to the outcome associated with each matchStep 4: Identify the Best AlternativeDecision analysis:


DECISION-MAKING PROCESS: DECIDEExample: El Nacho FoodsUncertainties about CompetitorsReduce priceMaintain priceMaintain lower priceReduce price furtherAlternative Courses of Action for Frozen DinnersStep 4: Identify the Best Alternative


EXHIBIT 3.1: DECISION TREE FOR EL NACHO FOODS$175,000$90,000Company ActionCompetitive ResponseFinancial Outcome$150,000$110,000Maintain priceMaintain priceReduce price furtherMaintain priceReduce price furtherReduce price


DECISION-MAKING PROCESS: DECIDEDisplays the alternatives, uncertainties, and outcomes facing a firmA payoff table:Includes managements determination of the probability of an uncertaintys occurrenceStep 4: Identify the Best Alternative


EXHIBIT 3.2: PAYOFF TABLE FOR EL NACHO FOODS$110,000

$90,000

$150,000

$175,000Competitors Maintain Price (Probability = 0.9)Reduce priceMaintain priceUncertaintiesAlternativesCompetitors Reduce Price (Probability = 0.1)


DECISION-MAKING PROCESS: DECIDEA payoff table computes the expected monetary value (EMV) for each alternativeThe EMV is calculated as follows:EMVPI = EMV of Perfect InformationStep 4: Identify the Best Alternative


EXHIBIT 3.3: DECISION ANALYSIS AND THE VALUE OF INFORMATION


DECISION-MAKING PROCESS: DECIDEIs a fundamental tool for considering what if situationsDecision analysis is important because it:Forces the manager to quantify outcomes associated with specific actionsIs useful in a variety of settingsCan be used in determining the value of perfect informationStep 4: Identify the Best Alternative


DECISION-MAKING PROCESS: DECIDEAllocating marketing, financial, and manufacturing resourcesAn implementation plan involves:The time needed to develop a marketing planStep 5: Develop a Plan for Implementing the Chosen Alternative


DECISION-MAKING PROCESS: DECIDEWas a decision made?With respect to the decision itself, ask:Was the decision proper given the situation?Step 6: Evaluate the Decision and the Decision ProcessInsufficient information present?Failure to consider and interpret relevant information?Logical assumptions made regarding data gaps?


DECISION-MAKING PROCESS: DECIDEWas the problem defined adequately?Ask 5 questions of the decision-making process:Were all the pertinent alternatives and uncertainties identified? Were the assumptions realistic?Was all the relevant information considered?Was an appropriate course of action recommended? Was the logic consistent? Was any important piece of information overlooked?How can the recommendation be implemented?Step 6: Evaluate the Decision and the Decision Process


PREPARING AND PRESENTING A CASE ANALYSISCHAPTER 3: MARKETING DECISION MAKING AND CASE ANALYSIS


PREPARING AND PRESENTING A CASE ANALYSISFirst reading. Become familiar with the situation of the organization:Identify insights into the problemObtain background information on the environment and organizationApproaching the Case


PREPARING AND PRESENTING A CASE ANALYSISSecond reading. Pay attention to key facts and assumptions:Determine relevance and reliability of the dataObtain background information on the environment and organizationApproaching the Case


PREPARING AND PRESENTING A CASE ANALYSISDo not rush to a conclusionAvoid these pitfalls:Do not confuse supposition with factDo not work the numbers until their meaning and derivation are understoodApproaching the Case


EXHIBIT 3.4a: MARKETING CASE ANALYSIS WORKSHEETNature of the Industry, Market, and Buyer BehaviorFormulating the Case Analysis


EXHIBIT 3.4b: MARKETING CASE ANALYSIS WORKSHEETThe OrganizationFormulating the Case Analysis


EXHIBIT 3.4c: MARKETING CASE ANALYSIS WORKSHEETA Plan of ActionFormulating the Case Analysis


EXHIBIT 3.4d: MARKETING CASE ANALYSIS WORKSHEETPotential OutcomesFormulating the Case Analysis


If using teams:Create a balanced team whose members skill sets complement one another (writing, oral presentation, financial, etc.)PREPARING AND PRESENTING A CASE ANALYSISBe committed to the task and dependableFormulating the Case AnalysisAvoid groupthink


COMMUNICATING THE CASE ANALYSISClass DiscussionCase preparation requires 4-5 hoursBring notes to classCarefully listen to the viewpoints of other students during the discussion of the casePrepare a short summary of the case after discussing it in class


COMMUNICATING THE CASE ANALYSISOral PresentationVisual aids do not replace the oral presentationDo not read slides to the audienceDo not use too many graphics, colors, and transitions Rehearse the presentation


COMMUNICATING THE CASE ANALYSISPresentation title and presenters namesOutline of the presentation Key problems and strategic issues that management needs to addressAnalysis of the organizations situation or problemRecommendations and supporting reasoningOral PresentationSlides should cover the following:


COMMUNICATING THE CASE ANALYSISWritten ReportBe carefully organized and grammatically correctHas three major sections:Strategic problem and issue identificationAnalysis and evaluationRecommendations


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