mba7020_01.ppt/june 13, 2005/page 1 georgia state university - confidential mba 7020 business...
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MBA7020_01.ppt/June 13, 2005/Page 1Georgia State University - Confidential
MBA 7020
Business Analysis Foundations
Introduction - Why Business Analysis
June 13, 2005
MBA7020_01.ppt/June 13, 2005/Page 2Georgia State University - Confidential
Agenda
Business Analysis -
Models
The Modeling Process
Introduction to Decision Sciences
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Decision Sciences: Conceptualized!
Information Technology
Analytical Methods
Decision Making
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What is Decision Sciences
Grocery Industry• Kroger
Travel Industry• Delta SkyMiles• Marriott Rewards
Gambling Industry• MGM Mirage Players Club
• The Mirage• Treasure Island• Bellagio• New York New York• MGM Grand
Retail Business• Best Buy• Circuit City• Macy
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Agenda
Business Analysis -
Models
The Modeling Process
Introduction to Decision Sciences
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MBA 7020 Business Analysis FoundationsCourse Overview
B reakevenP ric in g fo r M ax P ro fitC rossover
B as ic P ro fit M od e ls
N a ive / E xp . S m ooth in gR eg ress ion (tren d )C lass ica l D ecom p os it ion(tren d + season a lity)
T im e S eries F orecas tin g
D eterm in is tic M od e ls
A lte rn a tives , S ta tes , P ayo ffsD ec is ion C rite riaD ec is ion TreesB ayes Th eorem
D ec is ion A n a lys is
R an d om n u m b ersD is trib u tion sD isc re te V ariab lesC on tin u ou s V ariab les
S im u la tion
P rob ab ilis t ic M od e ls
M od e lin g Tech n iq u es
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Deterministic Models vs.Probabilistic (Stochastic) Models
Deterministic Models
• are models in which all relevant data are assumed to be known with certainty.
• can handle complex situations with many decisions and constraints
• are very useful when there are few uncontrolled model inputs that are uncertain.
• are useful for a variety of management problems.
• are easy to incorporate constraints on variables.
• software is available to optimize constrained models.
• allows for managerial interpretation of results.
• constrained optimization provides useful way to frame situations.
• will help develop your ability to formulate models in general.
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Deterministic Models vs.Probabilistic (Stochastic) Models
Probabilistic (Stochastic) Models
• are models in which some inputs to the model are not known with certainty.
• uncertainty is incorporated via probabilities on these “random” variables.
• very useful when there are only a few uncertain model inputs and few or no constraints.
• often used for strategic decision making involving an organization’s relationship to its environment.
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Classification of Models
By problem type• Forecasting• Decision Analysis• Constrained Optimization• Monte Carlo Simulation
By data type• Time series
• Exponential smoothing• Moving average
• Cross sectional• Multiple linear regression
By causality• Causal: causal variable• Non-causal: surrogate
variable
Methodologies1. Qualitative Delphi Methods
2. Quantitative - Non-statistical Using “comparables”
3. Quantitative - Statistical Time-series Regression
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Analytical Methods
Quantitative Methods
• Mathematical / Algebraic / Calculus Methods
• Statistical Modeling and Analysis
• Management Science / Operations Research Techniques
• Accounting / Financial Modeling
Qualitative Methods
• Nominal Group Techniques
• Heuristic Based Methods
• Expert Systems / AI
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UNCERTAINTY
• Facts not known
• Gather Information
• Fact Finding /.Analysis
DATABASED
COMPLEXITY
• Too many facts
• Generate Information
• Simulation/Synthesis
MODELBASED
EQUIVOCALITY
• Facts not Clear
• Interpret Information
• Application of Expertise
KNOWLEDGEBASED
Decision Environment
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Decision Making Process
INTELLIGENCE•Fact Finding•Problem/Opportunity Sensing•Analysis/Exploration
DESIGN
•Formulation of Solutions•Generation of Alternatives•Modeling/Simulation
CHOICE
•Alternative Selection•Goal Maximization•Decision Making•Implementation
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Types and Levels of Decisions
STRATEGIC
TACTICAL
OPERATIONAL
UNSTRUCTURED
STRUCTURED TRANSACTION
PROCESSING
MANAGEMENT
INFORMATION
DECISION
SUPPORT
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Applications of Information Technology
• Transaction Processing Systems
• Management Information Systems
• Decision Support Systems
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Decision Support Systems
Data
Base
Model
Base
Knowledge
Base
User Interface
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Agenda
Business Analysis -
Models
The Modeling Process
Introduction to Decision Sciences
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Managing OrganizationsInformed decision making as a prerequisite for success
Action
Vision
Mission
Organizational
Context
Policies, Goals, and Objectives
Givens
Values, Purpose, Structure, Politics, Environment, etc.
What should be done ?
Analytics, Decision Making
When and how ??
StrategicDirection
DecisionMaking
Implementation Project Management
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Managerial Decision MakingInformation Technology Solutions for Improving Effectiveness
ComplexityWhat does it add up to?Uncertainty
What can happen?
INTELLIGENCE
CHOICE
DESIGN
DATAMODELS
Variables (Measures and Estimates)
Probabilities and Estimates
Structuring Relationships
Problem Representation
Generation of Alternatives
Decision Analysis and Influence Diagrams for Visualizing Models and Choices
Spreadsheet Models
for managing complex relationships and detail
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Modeling Decision SituationsProcess for Developing Meaningful and Robust Models
Objective Hierarchies
Variables and Measures
Modeling Relationships
Situation Structuring
Testing and Validation
Implementation and UseDSS
Fundamental and Means Objectives (feasible?)
Decision, Intermediate, and Outcome Variables
Data, Probabilities, Distributions
Communicate
Influence Diagrams and Decision Trees
Spreadsheet Modeling
Statistical, OR, Financial, Acctg. Models
Values, Goals, Strategies, etc
Analyze & Synthesize
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The Modeling Process Quantitative - Statistical
Variables and Attributes
ObjectiveHierarchies
Influence Diagrams
Mathematical Representation
Testing and Validation
Implementationand use
• Describe Problem / opportunity
• Identify Overall Objective
• Organize Sub-Objectives into a hierarchy
• Identify Model’s Objective
• Determine all variables and their attributes
• Decide on Measurement / Data Collection
• Graphically depict relationships among variables
• Distinguish between Decision and outcome variables
• Determine mathematical relationships among variables
• Develop mathematical model(s)
• Evaluate reliability and validity
• Understand limitations
• Implement models in DSSs
• Clarify assumptions, inputs, and outputs
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The Decision Analysis ProcessTools for Visualizing and Evaluating Alternatives
Identify decision situation
and understand objectives
Identify alternatives
Decompose and model
• problem structure
• uncertainty
• preferences
Choose best alternative
Sensitivity Analyses
Implement Decision
Model Representation
Deterministic Analysis
Probabilistic Analysis
Evaluation of Alternatives
Decision, Chance, and Consequence Variables
Arcs and Relationship Formulas
Tornado Diagrams
N-way Sensitivity
Uncertainty Assessment
Risk Profiles
EMV, NPV, etc.
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The Modeling Process Quantitative – Non-Statistical
Managerial Approach to Decision Making
Manager analyzes situation (alternatives)
Makes decision toresolve conflict
Decisions are implemented
Consequences of decision
These stepsUse
SpreadsheetModeling