Marketing

Decision
Making and
Case Analysis

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AFTER READING THIS CHAPTER

YOU SHOULD BE ABLE TO:
1. Describe each step in the decision-making
process using the DECIDE method.
2. Prepare and present an analysis of a written
case.

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DECISION MAKING

Decision making is a rational and

systematic process and that its
organization is a definite sequence
of steps, each of them in turn
rational and systematic.
Peter Drucker

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CHAPTER 3: MARKETING DECISION

MAKING AND CASE ANALYSIS

DECISION-MAKING
PROCESS

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DECISION-MAKING PROCESS: DECIDE

Define the problem
Enumerate the decision factors
Consider the 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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STEP 1: DEFINE THE PROBLEM

A problem well defined is half solved.
John Dewey

Problem definition framework includes:

Objectives

Constraints

Success
Measures
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STEP 2: ENUMERATE THE DECISION

FACTORS
Two decision factors to be enumerated and related to
each other:

Alternative
Courses of Action

Uncertainties

Controllable by the
decision maker such as
the marketing mix.

Uncontrollable factors
that the manager cannot
influence.
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STEP 3: CONSIDER RELEVANT

INFORMATION
Relevant information consists of information that relates to
the alternatives identified by the manager as being likely to
affect future events. Includes characteristics of the
following:

Industry
Organization
Consumers

(competitive
strengths and
position)

Alternatives

Competitors
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STEP 3: CONSIDER RELEVANT

INFORMATION
Identifying relevant information is difficult:
There is often an overabundance of information and viewpoints
Determining what does and does not matter is a skill learned
through experience
Resist the temptation to consider everything as factual
information

Sometimes relevant information must be created

A manager has performed a situation analysis when steps 1 through 3 are
completed.
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STEP 4: IDENTIFY THE BEST

ALTERNATIVE
The framework for identifying the best alternative is
decision analysis, which:
Matches each alternative with the uncertainties in the
environment
Assigns a quantitative value to the outcome associated with each
match

Use a decision tree and a payoff table to show the

relationship among alternatives, uncertainties, and
potential outcomes.
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STEP 4: IDENTIFY THE BEST

ALTERNATIVE
Example: El Nacho Foods

Alternative
Courses of Action
for Frozen Dinners

Uncertainties
about Competitors

Reduce price

Maintain lower price

Maintain price

Reduce price further

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EXHIBIT 3.1: DECISION TREE FOR

EL NACHO FOODS
Company
Action

Reduce price

Maintain price

Competitive
Response

Financial
Outcome

Maintain
price

$150,000

Reduce
price further

$110,000

Maintain
price

$175,000

Reduce
price further

$90,000
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STEP 4: IDENTIFY THE BEST

ALTERNATIVE
A payoff table:

Displays the alternatives, uncertainties, and

outcomes facing a firm.

Includes managements determination of the

probability of an uncertaintys occurrence.

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EXHIBIT 3.2: PAYOFF TABLE FOR

EL NACHO FOODS
Uncertainties

Reduce price

Competitors
Maintain Price
(Probability = 0.9)

Competitors
Reduce Price
(Probability = 0.1)

$150,000

$110,000

$175,000

$90,000

Alternatives
Maintain price

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STEP 4: IDENTIFY THE BEST

ALTERNATIVE
A payoff table computes the expected monetary value (EMV) for each
alternative.

The EMV is calculated as follows:

EMV =

(
(

Outcome of
Uncertainty11
Outcome of
Uncertainty2

Probability (p)
of Uncertainty11

Probability (p)
of Uncertainty22

)+
)+

EMVPI = EMV of Perfect Information

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EXHIBIT 3.3: DECISION ANALYSIS AND

THE VALUE OF INFORMATION
Payoff Table Uncertainties
Competitors
Competitors
Maintain Price
Reduce Price
(Probability = 0.9) (Probability = 0.1)
A1: Reduce price

EMV
Calculation

$150,000

$110,000

$146,000

$175,000

$90,000

$166,500

Alternatives
A2: Maintain price

EMVA1 = (0.9 $150,000) + (0.1 $110,000) = $146,000

EMVA2 = (0.9 $175,000) + (0.1 $90,000) = $166,500
EMVCertainty = (0.9 $175,000) + (0.1 $110,000) = $168,500
EMVPI = EMVCertainty EMVBest alternative

EMVPI = $168,500 $166,500) = $2,000

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STEP 4: IDENTIFY THE BEST

ALTERNATIVE
Decision analysis is important because it:
Is a fundamental tool for considering what if situations.

Forces the manager to quantify outcomes associated with specific actions.

Is useful in a variety of settings.

Can be used in determining the value of
perfect information.
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STEP 5: DEVELOP A PLAN FOR

IMPLEMENTING THE CHOSEN ALTERNATIVE

Developing an implementation plan involves:

Allocation of marketing, financial, and
manufacturing resources.

Timing needed to develop a marketing plan.

Strategy formulation.
Strategy implementation.
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STEP 6: EVALUATE THE DECISION

AND THE DECISION PROCESS
With respect to the decision itself, ask two questions:
Was a decision made?

Was the decision appropriate given the situation?

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STEP 6: EVALUATE THE DECISION

AND THE DECISION PROCESS
With respect to the performance of the decision-making process, ask five
questions:

Was the problem defined adequately?

Were all the pertinent alternatives and uncertainties identified? Were the
assumptions realistic?

Was all the relevant information considered?

Was an appropriate course of action recommended?
Was the logic consistent? Was any important piece of information overlooked?

How can the recommendation be implemented?

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CHAPTER 3: MARKETING DECISION

MAKING AND CASE ANALYSIS

PREPARING AND
PRESENTING
A CASE ANALYSIS

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APPROACHING THE CASE

First reading. Become familiar with the situation of
the organization:
Identify insights into the problem
Obtain background information on the environment and
organization

Second reading. ay attention to key facts and

assumptions:
Determine relevance and reliability of data
Take extensive notes
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APPROACHING THE CASE

Avoid these pitfalls:
Do not rush to a conclusion.

Do not work the numbers until their meaning and

derivation are understood.
Do not confuse supposition with fact.

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FORMULATING THE CASE ANALYSIS

Nature of the Industry, Market, and Buying
Behavior:

Assess the structure, conduct, and

performance of the industry and competitors.
Identify the buyers and why, where, when, how,
what, and how much they buy.

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FORMULATING THE CASE ANALYSIS

The Organization:

Understand an organizations resources

financial, human, and material.
Identify an organizations strengths and
weaknesses and the reasons for success or failure.
Assess the fit between an organization and its
environment via a SWOT analysis.
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FORMULATING THE CASE ANALYSIS

A Plan of Action:

Identify possible courses of action based on the

situation analysis.
Calculate realistic estimates of the revenues and
costs of each course of action.

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FORMULATING THE CASE ANALYSIS

Potential Outcomes:

Evaluate the potential outcomes of all courses of

action.
Recommend the best course of action to be pursued.

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FORMULATING THE CASE ANALYSIS

If Using Teams:

Create a balanced team whose members skill

sets complement one another (writing, oral
presentation, financial, etc.).
Be committed to the task and dependable.
Avoid groupthink.

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EXHIBIT 3.4: MARKETING CASE

ANALYSIS WORKSHEET
Nature of the
industry, market,
and buyer
behavior

The
Organization

A Plan
of Action

Potential
Outcomes

1.

What is the nature of the industry structure, conduct, and performance?

2.

Who are the competitors, and what are their strengths and weaknesses?

3.

How do consumers buy in this industry or market?

4.

Can the market be segmented? How? Can the segments be quantified?

5.

What are the requirements for success in this industry?

1.

What are the organizations mission, objectives, and distinctive competency?

2.

What is its offering to the market? How can its past and present performance be characterized? What is its potential?

3.

What is the situation in which the manager or organization finds itself?

4.

What factors have contributed to the present situation?

1.

What actions are available to the organization?

2.

What are the costs and benefits of action in both qualitative and quantitative terms?

3.

Is there a disparity between what the organization wants to do, should do, can do, and must do?

1.

What will be the buyer, trade, and competitive response to each course of action?

2.

How will each course of action satisfy buyer, trade, and organization requirements?

3.

What is the potential profitability of each course of action?

4.

Will the action enhance or reduce the organizations ability to compete in the future?

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EXHIBIT 3.4a: MARKETING CASE

ANALYSIS WORKSHEET
1. What is the nature of the industry
structure, conduct, and performance?

Nature of the
industry,
market, and
buyer
behavior

2. Who are the competitors, and what are

their strengths and weaknesses?
3. How do consumers buy in this industry or
market?
4. Can the market be segmented? How? Can
the segments be quantified?
5. What are the requirements for success in
this industry?
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EXHIBIT 3.4b: MARKETING CASE

ANALYSIS WORKSHEET
1. What are the organizations mission,
objectives, and distinctive competency?

The
Organization

2. What is its offering to the market? How can

its past and present performance be
characterized? What is its potential?

3. What is the situation in which the

manager or organization finds itself?
4. What factors have contributed to the
present situation?

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EXHIBIT 3.4c: MARKETING CASE

ANALYSIS WORKSHEET
1. What actions are available to the
organization?

A Plan
of Action

2. What are the costs and benefits of action

in both qualitative and quantitative terms?

3. Is there a disparity between what the

organization wants to do, should do, can do,
and must do?

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EXHIBIT 3.4d: MARKETING CASE

ANALYSIS WORKSHEET
1. What will be the buyer, trade, and competitive
response to each course of action?

Potential
Outcomes

2. How will each course of action satisfy buyer,

trade, and organization requirements?

3. What is the potential profitability of each

course of action?
4. Will the action enhance or reduce the
organizations ability to compete in the
future?

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COMMUNICATING THE CASE

ANALYSIS
Class Discussion
Case preparation requires 45 hours.
Bring notes to class.

Carefully listen to the viewpoints of other students

during the discussion of the case.
Prepare a short summary of the case after discussing
it in class.
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COMMUNICATING THE CASE

ANALYSIS
Oral Presentation
Rehearse the presentation.

Visual aids do not replace the oral presentation.

Do not read slides to the audience
Do not use too many graphics, colors, and transitions
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COMMUNICATING THE CASE

ANALYSIS
Oral Presentation
Slides should cover the following:
Opening slide: Presentation title and presenters names
Outline of the presentation
Key problems and strategic issues that management needs to address

Analysis of the organizations situation or problem

Recommendations and supporting reasoning for each
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COMMUNICATING THE CASE

ANALYSIS
Written Report
Be carefully organized and grammatically correct.
Has three major sections:

Strategic problem and issue identification

Analysis and evaluation
Recommendations
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