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Decision Making Techniques

Decision Making Techniques

Among the variety of important problems of modern management, the issues related to the adoption, development, and implementation of the decisions are supposed to be the most significant ones to every organization. In fact, the functions of the decision-making process, as the methodology of management, are quite diverse and related primarily to the decisions connected with the production, marketing, management, planning, organization, motivation, control, power distribution, conflict resolution etc. Each issue of the decision-making process has its own characteristics. However, there is something common to all of the abovementioned issues, namely the determination of the initial situation, alternative solutions, and implications of various options. These components can be used to characterize any problem occurred in the decision-making process. In other words, the decision-making process includes a great variety of the activities such as formulation and goal setting, the analysis of the problem based on the information received as well as the selection and justification of performance criteria and the possible consequences of decisions. It also entails the discussion with experts of different solutions to the problem (task), the selection and formulation of optimal solutions, and the specification of the solutions for its performers. However, most of the abovementioned steps are based on the usage of the specific decision-making techniques to prove the efficiency of the decision making process. Taking into account the abovementioned, the following paper is aimed at comparing the efficiency of the Multiple Criteria Decision Analysis technique with the trial and error method based on the experience of L’Oreal Group Company.

Methods Overview

The problem of business management implies the necessity to identify the different alternatives of action and choosing the optimal alternative, i.e. the one that allows the best results in achieving this goal. In fact, depending on the set task, the alternatives can refer to the new target areas (product markets), types of products, investments into the various spheres of activity of the enterprise etc. Thus, as a rule, they cannot be implemented simultaneously. The set goal of L’Oreal Group implies the achievement of the next billion of customers until 2020. It means that the company should consider the great variety of the alternatives related to the expansion onto the new markets as well as increasing the product range. It means that the Multiple Criteria Decision Analysis technique can be quite useful as the realizatio (implementation) of any of the possible alternatives leads to one or more of the effects (results). The expected results are the proceeds from the sale of goods, the cost of production, the market share, the ability to meet the demand, profits, costs of sales promotion, etc.

In the process of development of management decisions, it is important to assess the situation and alternative solutions properly to choose the most effective one that meets the objectives of the organization. The decision-making process is usually guided by the set objectives. Each goal must match the criterion, by which the degree of achievement of objectives can be evaluated (Rezaei, 2014). For example, to ensure high-quality products manufactured by the company, the role of the integral criterion can be given to the production of the quality product range as well as private criteria, or the indicators that characterize the functionality of the product such as economic, environmental, ergonomic ones as well as reliability, security, etc. (Rezaei, 2015). Naturally, assessing the pre-values of the partial criteria for the facility, one can assess the quality of the object as a whole more reliably (Opricovic & Tzeng, 2007).

The multi-criteria optimization algorithm of the decision-making process may imply the following steps:

  1. Isolation of Pareto set. This method consists of pairwise comparison of alternatives based on the selection of a binary relationship as well as the selection of the best alternative for all criteria highlighted in a new set, called as the kernel (Malakooti, 2013).
  2. Numerical optimization. This method is based on the assumption that among all of the existing criteria, the one can identified as the key. In this case, other criteria are taken into the account of the constraints, i.e. the task of selection is formed as the problem of finding the best option among the proposed alternatives.
  3. The introduction of a super test. This method involves the convolution of criteria based on the introduction of a scalar function of the vector argument (Maliene, 2011).

The acceptable option refers to the degree of satisfaction of all targets option solutions. At one pole of the spectrum in the alternatives presented are options that fully meet all the objectives. At the other extreme, there are alternatives that do not meet any goal. Between the two extremes, there are options that can meet different purposes in varying degrees. The decision-maker is faced with all the problems of the choice of options for multi-criteria. At some point in thiss sequence, alternatives can define the concept of “minimum acceptable” for the decision. This concept may be represented by one or more points in the sequence, which will separate acceptable from unacceptable. Rather, it will be a number, within which there is the variety of options with the minimum acceptability rate.

Feasibility option defines the likelihood that L’Oreal has or can obtain the necessary resources to implement this option. Here, it is difficult to delineate clearly the feasibility and impracticability of certain options. However, unlike the acceptability scale, the multi-criteria selection will cause difficulties for the feasibility of all options required, as resources should be made available. Here, the problem refers to the uncertainty that stems from two things. Firstly, the decision probably does not specify exactly what kind of resources will be needed and in what quantities. Secondly, the company cannot be sure that all required resources are available in time (Sałabun, 2015). The above-mentioned proves that the variants that are acceptable, but not feasible, or feasible, but not acceptable, should be discarded.

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Contrary to the Multiple Criteria Decision Analysis technique, the trial and error method is based on the experience of L’Oreal Group Company as well as the experience of other market players. Such a method implies the usage of the specific similar situations or events in the process of the decision-making to define if the proposed idea will be efficient as well as figure out its correspondence to the set goals. However, contrary to the Multiple Criteria Decision Analysis technique, the trial and error method can be characterized by the higher risk rate. In fact, such a method cannot be recommended as the tool for such a large international company as L’Oreal Group due to the high risk and cost of the possible errors. In fact, the trial and error method can be considered as one of the options within the Multiple Criteria Decision Analysis technique.

Conclusions

The implementation of the Multiple Criteria Decision Analysis technique is supposed to be the most efficient for L’Oreal Group Company to achieve the set goal of the conquest of the next billion of customers until 2020. The trial and error method can only be used as one of the options or alternatives proposed by the Multiple Criteria Decision Analysis. The Multiple Criteria Decision Analysis method can help L’Oreal Group to evaluate the alternatives and define the solution that will bring the maximum effect for the achievement of the set goal.

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