Chapter 3
Marketing Decision Making
and Case Analysis
In this chapter, you will
learn about…
1. Decision-Making Process
Define the Problem
Enumerate the Decision Factors
Consider Relevant Information
Identify the Best Alternative
Develop an Implementation Plan
Evaluate the decision and decision
process
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In this chapter, you will
learn about…
2. Preparing and presenting a case
analysis
Approaching the case analysis
Formulating the case analysis
Communicating the case analysis
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Decision Making
“Decision making is a rational and
systematic process. Its organization is a
definite sequence of steps, each of them
in turn rational and systematic.”
- Peter Drucker
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Decision Making
Define the Problem
Enumerate Decision Factors
Consider Relevant Information
Identify the Best Alternative
Develop a Plan for Implementing
the Chosen Alternative
Evaluate the Decision and the
Decision Process
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Define the Problem
A well-defined problem outlines the
framework within which a solution can
be derived. It includes:
Objectives of the decision maker
Recognition of constraints
Clear success measure or goal for
assessing progress toward solving the
problem
e.g., El Nacho Foods
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Enumerate the
Decision Factors
Factors to be enumerated
Controllable
Alternative
Courses of Action
Uncontrollable
Uncertainties in
the Competitive
Environment
e.g., Arrow Shirts
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Consider Relevant
Information
“The truly successful managers and
leaders of the [twenty-first] century
will…be characterized not by how they can
access information, but how they can
access the most relevant information and
differentiate it from the exponentially
multiplying masses of non-relevant
information.”
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Consider Relevant
Information
Characteristics of the industry and
competitive environment
Characteristics of the organization
Characteristics of the alternatives
under consideration
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Consider Relevant
Information
Points to Remember
1. Resist the temptation to consider
everything in a case as a “fact”
2. Create relevant information, if
not available, by blending
together data given in the case
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Identify the
Best Alternative
Decision analysis
Matches each alternative identified by
the manager with the uncertainties
existing in the environment and
assigns a quantitative value to the
outcome associated with each match.
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Identify the Best Alternative
Sample Decision Tree
Company
Action
Competitive
Response
Financial
Outcome
Maintain price
$150,000
Reduce price further
$110,000
Maintain price
$175,000
Reduce price
Maintain price
Reduce price further
$90,000
Identify the Best
Alternative
Expected Monetary Value
The Expected Monetary Value (EMV) of a
decision alternative is:
Outcome of Uncertainty1 x P(Uncertainty1)
+ Outcome of Uncertainty2 x P(Uncertainty2)
+…
+ Outcome of Uncertaintyn x P(Uncertaintyn)
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Identify the Best Alternative
Sample Payoff Table
Uncertainties
Alternatives
Competitors
maintain price
(Probability=0.9)
Competitors
reduce price
(Probability=0.1)
Reduce Price
$150,000
$110,000
Maintain Price
$175,000
$90,000
Expected value of reducing price:
(0.9) ($150000) + (0.1) ($110000) = $146,000
Expected value of maintaining price: (0.9) ($175000) + (0.1) ($90000) = $166,500
Identify the Best Alternative
Expected Value of Perfect Information
Uncertainties
Alternatives
Competitors
maintain price
(Probability=0.9)
Competitors
reduce price
(Probability=0.1)
Reduce Price
$150,000
$110,000
Maintain Price
$175,000
$90,000
Expected value of certainty:
(0.9)($175000) + (0.1)($110000) = $168,500
Expected value of perfect info: EMVcertainty– EMVbest alt.: $168500 - $166500 = $2,000
Familiarity with decision
analysis is important for
FOUR reasons:
1. It is a fundamental tool for considering
“what if” situations
2. It forces the case analyst to quantify
outcomes associated with specific actions
3. It is useful in a variety of settings –
product, communication, channel, or
pricing decisions
4. It can be used in determining the value of
“perfect” information
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Develop a Plan for
Implementing the Chosen
Alternative
Resource allocation and timing
Strategy formulation
Strategy implementation
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Evaluate the Decision
Was a decision made?
Was the decision appropriate, given the
situation identified in the case setting?
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Evaluate the Decision
Process
1. Did I define the problem accurately?
2. Did I identify all pertinent alternatives
and uncertainties? Were my
assumptions realistic?
3. Did I consider all information relevant to
the decision?
4. Did I recommend the appropriate
course of action?
5. Did I consider how my recommendation
could be implemented?
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Case Analysis
Approaching the Case
Become familiar with the issue(s) at
hand
Identify key “facts and assumptions”
Do not rush to a conclusion
Do not “work the numbers” until you
understand their meaning
Do not confuse supposition with fact
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Case Analysis
Formulating the Analysis
Framework for Analysis
Nature of the industry, market,
and buying behavior
The organization
A plan of action
Potential outcomes
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Formulating the Analysis
Nature of the Industry, Market,
and Buying Behavior
What is the nature of industry
structure, conduct, and performance?
Who are the competitors, and what are
their strengths and weaknesses?
How do consumers buy in this industry
or market?
Can the market be segmented? How?
Can the segments be quantified?
What are the requirements for success
in this industry?
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Formulating the Analysis
The Organization
What are the organization’s mission,
objectives, and distinctive competency?
What is its offering to the market? How
can its past and present performance be
characterized? What is its potential?
What is the situation in which the
manager or organization finds itself?
What factors have contributed to the
present situation?
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Formulating the Analysis
A Plan of Action
What actions are available to the
organization?
What are the costs and benefits of
actions in both qualitative and
quantitative terms?
Is there a disparity between what the
organization wants to do, should do,
can do, and must do?
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Formulating the Analysis
Potential Outcomes
What will be the buyer, trade, and
competitive response to each course
of action?
How will each course of action satisfy
buyer, trade, and organization
requirements?
What is the potential profitability of
each course of action?
Will the action enhance or reduce the
organization’s ability to compete in
the future?
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Case Analysis
Communicating the Analysis
Class discussion
Oral presentation
Written report
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Communicating the
Analysis
The oral presentation should
have five major sections:
1.
Title of presentation and presenters’
names
2.
Presentation outline
3.
Key problems and strategic issues
4.
Analysis of company’s situation
5.
Recommendations with supporting
arguments and reasoning for each
recommendation
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Communicating the
Analysis
Written Report should have three
major sections:
1. Identification of the strategic
issues and problems
2. Analysis and evaluation
3. Recommendations
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