Decision Making Techniques in Organisation.

 Q. What is Decision Making? Throw light on various techniques used for making decisions in organisations these days.

Ans. MEANING OF DECISION-MAKING: Decision-making is an important function of every manager. When a manager chooses the best alternative out of many available ones, it is called decision and the process that has been adopted in order to reach the final decision is known as the decision-making. In other words, Decision-making is a process and decision is the outcome of such a process. 

Decision-making means analysing different alternatives and arriving at decision in the face of a particular situation about what to do and what not to do. In this way, decision-making means reaching a conclusion or final decision which can be implemented as a solution of a problem. 

According to Koontz and O’Donnel, “Decision-making is the actual selection from among alternatives of a course of action.”

According to George R. Terry, “Decision-making is the selection based on some criteria from two or more possible alternatives.”

According to Louis A. Allen, “Decision-making is the work which a manager performs to arrive at conclusion and judgement.”

Thus, decision-making involves the selection of the best available alternative as a solution of some problem. It is thus clear that a decision is needed when there are many alternatives to do a work. In other words, if there is only one method of doing a work there is no need to take a decision and in that case that method in itself is a decision. 

Decision-making Techniques: Following are the major techniques of decision-making:

1. Judgement Technique: This is the most ancient and simple technique of decision-making. According to this technique, the decisions are taken on the basis of past and present experience. This technique is the most useful for day-to-day small decisions but the use of this technique for taking important decisions is not free from risks.

2. Statistical Techniques: These days statistical technique is used as an important tool in taking important decisions. The various statistical techniques used in taking decisions are the following:

(i) Theory of Probability, 

(ii) Sampling Analysis,

(iii) Correlation/Regression,

(iv) Time Series Analysis,

(v) Ratio Analysis,

(vi) Variance Analysis,

(vii) Statistical Quality Control, etc. 

3. Operation Research Techniques: Apart from statistical techniques there are other modern techniques which are called Operations Research Techniques. They are used in very important decisions. Following are the Chief Operations Research Techniques:

(i) Linear Programming,

(ii) Game Theory,

(iii) Network Analysis,

(iv) Break-even Analysis,

(v) Waiting Line or Queuing Theory,

(vi) Cost-Benefit Analysis, etc.

4. Model Building Technique: This technique is employed in manufacturing concerns. Under this technique a model of an intended product is prepared and then it is estimated whether the product is according to the taste of the customers or not. Many models of a particular product are prepared and then the decision to produce a particular model which the approval of the taste of the customers is taken.

5. Behavioural Technique: The science of behaviour has also developed many techniques of decision-making. With the help of these techniques factors affecting a particular decision are evaluated. Group decisions are an important contribution of this science.

6. Principles of Management Technique: This technique lays down that while taking decision the principles of management should be kept in mind. In reality it can be observed that the principles of management are not a technique of decision-making, but prepare only an atmosphere for decision-making process.

7. Intuition Technique: Taking decision under this technique employs one’s intuitive feelings and knowledge. The decision maker thinks about a problem and his mind suggests the solution. Decisions by this technique are quick. The correctness of the decision depends on the experience, education, training, etc., of the decision-maker.

SWOT Analysis: Components, useful/uses in budiness

 Q. What is SWOT analysis ? What are its main components ? How is it useful in business?

Ans. Meaning of SWOT analysis: SWOT analysis is an analysis undertaken by business firms to understand their external and internal environment. The term SWOT consists of four words :

S — Strengths

W — Weaknesses 

O — Opportunities 

T — Threats

It is also known as WOTS–UP analysis. SWOT analysis is applied to formulate effective organisational strategies. The business firms can match through SWOT analysis, the strengths (S) and weaknesses (W) existing within an organisation with the opportunities (O) and threats (T) operating in the environment. An effective organisational strategy according to SWOT analysis is that strategy which capitalizes on the opportunities through the use of its strengths and neutralizes the threats by minimizing the impact of weaknesses. Thus, SWOT analysis enables a business firm to use its strengths to exploit the opportunities provided by the environment. On the other hand, threats of environment are neutralized by reducing its weaknesses to the minimum level. 

Components of SWOT Analysis: The SWOT analysis consists of following components:

1. Environment: The term business environment means the aggregate of all conditions, events and influences that surround and affect the business organisation. It may be of two types:

(a) External Environment: The external environment of a business firm is that environment which includes all the factors outside the organisation. These factors provide opportunities or pose (present or constitute (make) threats to the organisation. Thus, external environment provides opportunities as well as threats. 

(b) Internal Environment: Internal environment is that environment which includes all the factors within an organisation. These factors impart strengths or cause weaknesses of a strategic nature. 

In short, the environment in which an organisation exists can be described (i) in terms of opportunities and threats operating in the external environment and (ii) in terms of strengths and weaknesses existing in the internal environment. 

2. Strengths (S): The strength of a business organisation refers to an inherent capacity by which an organisation can gain important advantages over its competitors. For example, superior research facilities and presence of developmental skills are the strengths of a business organisation. These can be used as development of new products, enabling the business organisation to have competitive advantages over its competitors.

3. Weaknesses (W): The weakness of a firm refers to an inherent limitation of a business firm. It results in significant disadvantages for a firm in comparison to its competitors. For example, over-dependence of a firm on a single product line is its weakness. It can result in losses in times of crisis.

4. Opportunities (O): The availability of opportunity is a favourable condition in the organisation’s environment. It enables it to consolidate and strengthen its position in comparison to its competitors. For example, an increasing demand for the product, produced by the business organisation is an indication of an opportunity. 

5. Threats (T): The presence of a threat is an unfavorable condition in the environment of a business organisation. It causes damages to and creates a risk for the organisation. For example, the emergence of strong new competitors is a threat to the business organisations because of the possibility of a stiff competition. 

Uses of SWOT Analysis: Following are the uses of SWOT analysis: 

1. It helps to determine the strategy of the business.

2. It is used in the initial stage of decision-making.

3. Use of external and internal factors of this analysis, help in visualising a complete picture about the future of the business. 

4. It also helps in facing the competition successfully.

5. SWOT analysis is helpful in minimising the weaknesses and maximising the strengths of the business. 

We can conclude that SWOT analysis is a systematic approach to understand the environment and formulate strategic policies.

Define Accounting. Advantages and disadvantages.

 Q. Define Accounting. Explain its advantages and disadvantages.

Ans. MEANING OF ACCOUNTING: Accounting is the art of recording, classifying, summarising and communicating financial information to users for correct decision making. It gives information on:

(i) resources available

(ii) how the available resources have been employed

(iii) the results achieved by their use.

Since accounting is a medium of communication, it is called The language of business. 

DEFINITION OF ACCOUNTING: According to American Institute of Certified Public Accountants (A.I.C.P.A.), “Accounting is the art of recording, classifying and summarising in a significant manner and in terms of money, transactions and events which are, in part atleast, of a financial character, and interpreting the results thereof.”

ADVANTAGES OF ACCOUNTING: Accounting offers the following advantages:

i) Useful in Management of Business: Management needs a lot of information for the efficient running of the business. All such information is provided by the accounting which helps the management in planning, decision making and controlling. For example management would like to know whether the sales are increasing or decreasing and also the speed of increase in the cost of production. All such information is provided by the accounting, which helps the management in estimating the future sales and expenses. 

ii) Provides Complete and Systematic Record: Business transactions have grown in size and complexity and it is not possible to remember each and every transaction. Accounting keeps a prompt and systematic record of all the transactions and summarizes them in order to provide a true picture of the activities of the business entity.

iii) Information Regarding Profit or Loss: Accounting reports the net result of business activities of an accounting period. The Profit & Loss Account prepared at the end of each accounting period discloses the net profit earned or loss suffered during that period. The information regarding profit is of great use to the owners and various other interested parties.

iv) Information Regarding Financial Position: Accounting reports the financial position of the business by preparing a Balance Sheet at the end of each accounting period.

v) Evidence in Legal matters: Properly maintained accounts, supported by authenticated documents are accepted by the courts as a firm evidence.

vi) Facilitates Comparative Study: By keeping a systematic record, accounting helps the owners to compare one year's costs, expenses, sales and profit etc. with those of other years. Such a comparison provides the useful informations on the basis of which important decisions can be taken more judiciously.

vii) Facilitates in Assessment of Tax Liability: Properly maintained records will be of great help when the firm is assessed to income tax or sales tax. Such records when audited are trusted by the taxation authorities.

viii) Facilitates Sale of Business: If a business entity is being sold, the accounting information can be utilised to determine the proper purchase price.

ix) Helpful in Raising Loans: Accounting information is of great help while raising loans from banks or other financial institutions. Such institutions before sanctioning loan screen various financial statements of the firm such as final accounts, fund flow statement, cash flow statement etc.

x) Helpful in Prevention and Detection of Errors and Frauds.  

DISADVANTAGES OF ACCOUNTING: Accounting provides valuable information. However, it has certain limitations which must be kept in mind while using such information. These limitations are as follows:

i) Omission of Qualitative Informations: Accounts contain only those informations which can be expressed in terms of money. Qualitative aspects of business units are completely omitted from the books as these cannot be expressed in monetary terms. Thus, changes in management, reputation of the business, cordial management-labour relations, firm’s ability to develop new products, efficiency of the management, satisfaction of fim’s customers etc. which have a vital bearing on the profitability of the firm are all ignored and omitted from being recorded because all of these are qualitative in nature.

ii) Based on Historical Costs: Accounts are prepared on the basis of historical costs (i.e., the original costs) and as such the figures given in financial statements do not show the effect of changes in price level. The assets remain undervalued in many cases particularly land and building. The outcome this practice is that balance sheet values of assets are not helpful in estimating the true financial position of the business.

iii) Influenced by Personal Judgements: Accounting is as yet an exact science and accountant has to exercise his personal judgement in respect of various items. For example, it is extremely difficult to predict with any degree of accuracy the actual useful life of an asset which is needed for calculating depreciation. The same is true about method of valuation of stock and making provision for doubtful debts. Different persons are bound to have different opinions in respect of such things and hence it will result in ascertainment of different figure of profit or loss of a business by different persons. Hence the figure of profit cannot be taken as an exact figure.

iv) Based on Accounting Concepts and Conventions: Accounts are prepared on the basis of a number of accounting concepts and conventions. Hence, the profitability and the financial position disclosed by it may not be realistic. For example, fixed assets are shown in the balance sheet according to the ‘going concern concept’. This means that the fixed assets are shown at their cost and not at their market value. The values realised on their sale may be more or less than the values stated in the balance sheet.

v) Incomplete Information: Accounting statements provide only the incomplete information because the actual profit or loss of a business can be known only when the business is closed down. 

vi) Affected by Window Dressing: Window dressing refers to the practice of manipulating accounts, so that the financial statements may disclose a more favourable position than the actual position. For example, the purchases made at the end of the year may not be recorded or the closing stock may be over-valued. Hence, correct decisions cannot be taken on the basis of such financial statements.

vii) Unsuitable for Forecasting: Financial Accounts are only a record of past events. Continuous changes take place in the demand of the product, policies adopted by the firm, the position of the competition etc. As such, the financial analysis based on past events may not be of much use of forecasting.

Marketing Research Process Procedure

 Q. Explain the procedure of conducting marketing research. 

Ans. Marketing research process consists a sequence of several steps, these steps are closely interlinked and interdependent. They are so logical that success of one depends on the prior step. Marketing research process is carried out with a series of steps which are required to be taken in a chronological order. Some commonly followed major steps involved in a marketing research project are as follows:

1. Formulation of Research Problem: The first step in any marketing research project is formulating a research problem. It is the most important stage in applied research because poorly defined problem will not give useful results. It is rightly said that, “a problem well defined is half-solved.” Poorly formulated problems create confusion and do not allow the researcher to develop a good research design. Therefore, the researcher should take into account the purpose of the study, the relevant background information, the information needed and how it will be used in decision making. 

Formulation of research problem involves discussion with the decision makers, interview with industry experts and analysis of secondary data. Formulation of research problem involves three sub-steps:

i) Discovering the managerial problem: Discovering the managerial problem is not a easy job, because these are covert (meaning hidden) and subtle (meaning complex, difficult). The dynamic and competitive world of business creates many problems for the firm. One should be alert in discovering the managerial problem well in advance of its occurrence.

ii) Defining the problem: It is really difficult to define managerial problem as it is more systematic than cause-oriented. The researcher is to go to the very roots of the problem to establish cause and effect relations. For example, the problem of falling sales may be because of wrong pricing, wrong packaging, wrong distribution system or cut throat competition. The researcher is to see the real cause of falling sales.

iii) Translating of managerial problem into a research problem: A research problem is one in respect of which the data is collected and analysed to find a solution. All management problems are not research problems. Therefore, to translate managerial problem into a research problem, the cause and effect relation must be established. Translation of managerial problem into a research problem involves the in-depth study of company’s strengths and weaknesses in respect of production, marketing, finance and study of marketing environment under which the company is working. 

Thus, it is clear that to investigate the reasons for falling sales researcher can investigate all aspects affecting sales or he may investigate the problem on the basis of product policies or pricing policies or distribution policies or other marketing policies of the company. But it is sure that before assigning research project to the researcher, the problem in hand must be well defined, because a well defined problem leads to a better solution.

2. Situation Analysis: Situation analysis is important to obtain background information on the problem. Situation analysis means the circumstances under which the research is being conducted. Situation analysis generally consists of following information:

(i) Products of the company

(ii) Company itself its competitors and the industry in general

(iii) Its markets

(iv) Its channels of distribution 

(v) Its sales organisation 

(vi) Its advertising and sales policies

This analysis enables the researcher to arrive at a hypothesis or a tentative presumption on the basis of which further investigation may be done. Hypothesis are tentative statements describing relationship between concepts or possible cause and effect relationships. 

Formulation of research problem helps to specify and precise the scope of marketing problem. It makes research both economical and meaningful.

3. Developing Research Design: Research design is the heart of marketing research. Once the research problem is defined, the next step is to determine research design. A research design specifies the methods and procedures for conducting a marketing research. A research design is the master plan for the conduct of marketing research. Research design keeps the study right on the track making it to keep pace with the problem requirements and makes possible best result with minimum resources and possible procedures. Research design specifies the methods for data collection and data analysis i.e, 

(i) How would tĥe data be collected?

(ii) Which instruments for data collection would be used?

(iii) What sampling method would be used?

The choice of research design will depend essentially on the nature of the problem on which the research is to be undertaken. Another factor is the scope of the research project. Research having wider scope has different research design from a research having limited scope. 

Research designs are classified by the purpose of research and data collection efforts. These are: 

(i) Exploratory Research Design: An exploratory research design focuses on the discovery of ideas and is generally based on secondary data. This design aims at defining the research problem and identifying the possible alternative solutions. Information for exploratory research are gathered from the internal sources, interviews with knowledgeable persons and from secondary sources. 

(ii) Descriptive Research Design: It is most commonly used research design. A descriptive study is undertaken when the researcher wants to know the characteristics of certain group on the basis of age, education, income, occupation, etc. The purpose of descriptive research design is:

1. to describe the phenomena,

2. to describe the consequences of possible alternative course of actions,

3. to describe the potential market in terms of present and future attitude of the customers and 

4. to describe the product image.

(iii) Causal Research Design: A causal research design is undertaken when the researcher wants to know the cause and effect relationship between two or more variables. 

Formulation of research design involves the following steps: 

1. Determining the objectives of the research project.

2. Determining the scope of the research project.

3. Determining the methods for collection of data.

4. Designing the questionnaire.

5. Deciding sampling process and sample size.

6. Decision regarding analysis and interpretation of data.

7. Determining the time required for research work.

8. Determining the budget of completion of research project.

9. Designing the personnel and administrative set-up.

10. Preparing the research proposal and getting it approved. 

4. Collection of Marketing Data: Once the research design is finalised, the next step before the researcher is to go for data collection. A comprehensive research study requires both primary and secondary data. 

(i) Primary Data: Primary data is one which is originally collected by the researcher specifically for the project in hand through questionnaire and interviews. Collection of primary data is time and money consuming affair. It is an unpublished but latest and relevant to the problem and most accurate. It may be collected by survey, observation or experimentation method. Primary data sources includes: Company’s salesman, consumers, middlemen, executives, suppliers, competitors and trade associations. 

(ii) Secondary Data: Data originally collected by someone else for other purpose but can be used for research project in hand is known as secondary data. Such data or information may not be latest but accurate and reliable. It costs less in terms of time and money. The sources of secondary data are: Internal company records, Government Publications, Government Reports, Publication of Research Organisations, Publications of Trade Associations and Chamber of Commerce, Reports and Journals etc. 

The researcher has to decide whether he has to collect primary data or depend on secondary data. Sometime the researcher study is based on both primary data as well as secondary data. When a study is based on secondary data, it is necessary to satisfy oneself that the available data are matched with the objectives of research project. One should be familiar with the authentic sources of such data, their periodicity, the concept used in compilation and their limitations, if any. The researcher should look to the secondary data first, if needed information are already available, the time and expense of gathering it from primary sources can be saved. 

If the decision in favour of primary data is taken, then one has to decide the method of data collection. Following three methods are available for collecting primary data. 

I. OBSERVATION METHOD: Suggests that data are collected through one’s observation. This method is non-reactive as data are collected without the direct participation of the respondent. In observation method, actions of the respondents are observed either directly mixing with them or indirectly without getting mixed up with them. 

II. EXPERIMENTATION METHOD: The experimentation method emphasis on the creation of controlled environment where some variables are allowed to vary and cause-and-effect relationship is studied. 

III. SURVEY METHOD: In marketing research, field surveys are commonly used to collect primary data. With the use of survey method, we are able to collect wide range of valuable information, which may not be possible in observation and experimentation methods. Surveys can be (i) personal, (ii) telephonic and (iii) by mail. Personal interviews are suitable when detailed information are to be collected. Telephonic survey is suitable when limited information is sought in a short period of time. Mail survey is used when respondents are scattered over a large geographical area and detailed information are required. Sometimes a combination of two or more methods could also be used. 

5. Determining Sampling Design and Sample Size: When the marketing researcher has decided to carry out a field survey, he has to decide whether it is to be census survey or sample survey. In census survey, all members of the relevant universe are contacted. In research surveys, it is not possible to contact the entire population because of cost, time and energy involved in it. Therefore, researcher has to establish a ‘sample’ or the representative group from whom the information may be collected. It is called as sample survey. 

In determining the sampling design, the researcher must specify:

(i) Sampling frame

(ii) Sample selection process 

(iii) Size of the sample

(i) Sampling frame: Sampling frame is the list of population elements from which sample will be drawn. 

(ii) Sample selection process: The sample selection process requires that the form of the sample must be specified. Will it be probability sample in which each population element has a known chance of being selected, or will it be a non-probability sample? The type of sample design chosen will depend on its suitability and the availability of the requisite sampling frame.

(iii) Sample size: Sample size means how many units to be surveyed? The researcher has to select a relevant fraction of the population which is the representative of the entire population or universe. In any case, the sample size must not be increased more than 10 per cent of the universe. 

6. Field Work and Data Collection: Field work is the most expensive of all the steps in a research project. Interviewing and supervision are two important aspects of field survey. The task of interviewing seems to be simple, but in reality, it is one of the most difficult task in marketing research. Because respondents are generally hesitant in giving information. If the researcher is carefully selected or trained, he may use his tactics and intelligence to persuade the respondents to answer the questions.

Supervision of field staff is equally important to ensure timely and proper completion of the field survey. Proper selection, training, supervision and evaluation of field force help to minimise data-collection errors. 

7. Analysis and Interpretation of Data: Once the field survey is over and filled questionnaires have been received, the next step is to aggregate the data in a meaningful manner. The data are first edited, coded and tabulated for the purpose of analysing them. 

Editing refers to the process by which collected data are reviewed to check that they are complete, consistent and that the instructions were followed. Editing facilitates tabulation.

Once the questionnaire forms have been edited they must be coded. Coding involves assigning numbers or letters codes to the observations, so that can be properly analysed.

Tabulation implies data arrangements as to classes and weightages. If the questionnaire has been well planned, tabulation work is very much facilitated. From the tabulated summaries, conclusions may be drawn. The editing, coding and tabulation functions are common to most research studies. The researcher should have a well thought out framework for processing and analysing the data and this should be done prior to the collection of data. The editing, coding and tabulation is must when the researcher has huge amount of data concerning the research project in hand.

It is necessary that the researcher gives as much importance to the analysis and interpretation if data as he has given to their collection. In the absence of proper analysis, data may be rendered useless resulting in a waste of time and money. The analysis of data can be conducted by using simple statistical tools like percentages, averages and measures of dispersion. The collected data may be analysed by using diagrams, graphs, charts, pictures, etc. Data may be cross-tabulated to produce useful relationships among the variables involved. 

Interpretation of data includes conclusion, summary and recommendations of research based on the statistical analysis. Thus, interpretation is a minute and meticulous work involving the use of mental facilities of sound judgement and clear vision to reach a cut-off point. 

8. Report Preparation and Presentation: Once the data have been tabulated, analysed and interpreted, the marketing researcher is to present his findings to the users in the form of research report. The report should be written in clear language, properly paragraphed and should be able not only to hold the interest of the reader but also convince him by presenting it with necessary evidences. 

While preparing a research report, the researcher should follow the principles of objectivity, coherence, clarity in the presentation of ideas and use of charts and diagrams. The essence of good research report is that it effectively communicates its research findings in simple and lucid manner. Latest visuals and colour combinations such as charts, graphs, diagrams, photographs are to be used. The findings and recommendations must be clear, precise and feasible. The report should be in written form and must be technically accurate as well as it should be understandable and useful. 

The research report must contain the following sequence:

1. Title page with name of organisation from whom it has been conducted

2. Table of contents, alongwith charts and diagrams used in the report

3. Preface

4. Statement of objectives and hypothesis with statement of marketing problem.

5. Research methodology containing (a) Research design, (b) Assumptions, (c) Data collection methods and instruments used, (d) Sampling plan, (e) Field survey, (f) Scheme of analysis and interpretation of data, (g) Scope and (h) Limitations 

6. Analysis of collected data

7. Interpretation of data 

8. Findings of the research study

9. Conclusions arrived at and recommendations suggested

10. Appendices: contain - (a) Copy of questionnaire used, (b) Glossary of terms, (c) Tables, (d) Maps, (e) Charts, (f) Photographs, (g) Bibliography 

9. Follow-up of Recommendations: .In the last, the researcher should follow up his study and see that his recommendations must be implemented. The researcher gets satisfaction and the user rich returns for his investments made in research only when the research findings are implemented in the form of objectives, policies, strategies, procedures and methods. 

Each step described above is more complex when actually performed. Because each involve number of issues to be decided. Marketing research attempt to achieve the scientific way in their research projects ɓy using a series of steps referred to collectively as the marketing research process.