Practical Application: Making Quantitative Decisions in Management

Instructor: Mary Matthiesen-Jones

Mary has worked around the world for over 30 years in international business, advertising, and market research. She has a Master's degree in International Management and has taught University undergraduate and graduate level courses .

Quantitative decision making tools are used by managers in every type of business. Let's practice applying these types of tools to a hypothetical scenario.

Selecting the Best Decision Making Tool

There are many different tools managers employ to help analyze situations and support their decisions.

  • Decision Trees are a graphic depiction of possible choices and resulting alternatives. They are a good way for us to ''see'' our way through a maze of choices.
  • Payback Analysis allows the calculation of financial outcomes from investment alternatives.
  • Simulations create possible scenarios. Managers see possible outcomes before they actually commit to a course of action in the real world.

A Decision Scenario

Logan inherited 5,000 acres of ranchland in Texas from his grandfather. Logan has been working for several years as an accountant in Austin. Ranching is a hard business and he does not plan to work the land himself. He does plan to keep the family home located on the edge of the land. He has to make some choices so he decides to explore some alternatives using decision making tools he learned in business school. Options he is considering include:

  1. Leasing the land to a rancher and collecting rent, or selling the land to a rancher.
  2. Leasing the land to a natural gas drilling company and collecting rent, knowing that accidents happen and there are potential environmental impacts with drilling.
  3. Developing the land for residential properties, investing his own money and obtaining bank loans.

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