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Module 1 - PowerPoint PPT Presentation

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  1. Module 1 INTRODUCTION TO DECISION ANALYSIS

  2. Introduction To Decision Analysis Learning Objectives • Reasons for studying decision analysis • Basic sources of decision difficulty • Decision analysis process • Applications of decision analysis

  3. Why Study Decision Analysis? • Managers are responsible for making decisions • Structured frameworks benefit complex decisions

  4. Why Study Decision Analysis? • The techniques can lead to better decisions • Decisions are made more effectively and more consistently • It helps managers deal with difficult decisions

  5. Why Study Decision Analysis? • Help you think about the specific problem at hand • Improve the quality of your decisions • Provide tools that you can use to model decision situations

  6. Basic Sources of Difficulty • Complexity • Uncertainty • Multiple objectives • Different perspectives

  7. Basic Sources of Difficulty • Complexity • Number of issues • Quantity of data • Number of stakeholders • Absence of decision structure

  8. Basic Sources of Difficulty • Uncertainty • Orientation to future • Incomplete information

  9. Basic Sources of Difficulty 3. Multiple Objectives • Progress in one direction may impede progress in others • Must trade off benefits in one area against costs in another

  10. Basic Sources of Difficulty • Different perspectives • Multiple decision makers • Different perspectives yield different outcomes

  11. A Decision Analysis Process • Identify decision situation and define objectives • Identify alternative choices • Develop models • Select the best alternative • Conduct sensitivity analysis • Conduct further analysis as needed • Implement best alternative

  12. A Decision Analysis Process • Figure 1.1 on page 6

  13. Where Is Decision Analysis Used? • Managing R&D programs • Forecasting sales for new products • Deciding whether to launch a new product or new venture • Negotiating commercial real estate developments • Setting regulatory standards for air and water pollution • Making medical diagnoses and evaluating treatment risks • Evaluating widespread testing for various medical conditions

  14. SUMMARY • The purpose of decision analysis is to help make decisions • Decision analysis is a process • Decision analysis provides a framework and methods for dealing with difficult decisions • Decision analysis is widely used