2005 Q1.

Rational Decision Making Process

1. Define the problem/Identify the issue
Ms. Butcher firsts need to identify the problem that is being experienced by her
business. This is not always easily done as many times the symptoms/effects of
problems can be mistaken for/confused with the cause of the problem/the underlying
problem.
In this situation, the problem being experienced by the computer store is a decline in
sales. While sales increased over the first two years of operations, sharp decreases
have occurred over the last two years. It is important that Ms. Butcher identifies the
problem as declining sales and not confuse it with the symptoms of poor sales lower
stock turnover and continuously exceeding her overdraft limit.
Clearly Ms. Butcher is not in a position where she wants to be with regards to sales
and profitability of the firm and a problem exists a decline in sales.
2. Data collection and analysis
Ms. Butcher would need to collect data which is accurate and relevant to this decline
in sales in order to make decisions. She will need to consult with her staff to try to
determine the reasons for declining sales. They would have very valuable ideas,
suggestions and points of view related to the reason for declining sales and ways of
improving the amount of sales at the computer store. Her employees would be the
ones who are in contact with customers and prospective customers and based on their
interaction, staff might have important information on why the store has not been
selling as much. Including the staff in the process would ensure that they are more
committed to whatever decision is taken in the end. She may also need to obtain data
on the prices charged for computers and accessories over the last four years.
Ms. Butcher would also need to obtain data external to the firm she may need to
collect data on competitors and their prices and levels of sales and on the overall size
of her target market (Central Statistical Office).
Ms. Butcher would need to analyse the data collected to help her determine the cause
of declining sales. She should be able to determine whether sales have declined due
to increased prices on her part, whether consumer tastes has changed and what they
now are, whether the problem is being experienced because of competitors lower
prices or whether there is a general decrease in demand for computers and computer
accessories in the area.
3. Development and Analysis of Alternative Strategies
Once Ms. Butcher has identified the underlying problem, she can begin to formulate
different courses of action which can solve the problem to increase sales.
She may consider various strategies to increase sales such as lower prices, increased
advertising, carrying different products (more suited to consumers tastes),
promotional activities, diversifying her business to offer different goods that may be in
higher demand and for which there is a larger market etc.

She would need to analyse each alternative to determine the pros and cons of each
and consider the consequences of each alternative course of action. It may be
necessary to test some of these alternatives to determine which one is most effective
and should be implemented. Various quantitative decision making tools can be used to
assist in deciding which course of action should be taken, e.g. decision trees but of
course qualitative factors must also be considered.

4. Selection and Implementation of Best Alternative

After having analysed each alternative, one must be chosen and implemented. Ms.
Butcher would select the course of action that proves to be most effective at
increasing sales. Ms. Butcher would also want to select the option with the least
amount of uncertainty and risk.
Once she has decided on the best alternative, she must put this into action. She must
convey the decision taken to her staff and get their commitment to it. Since they were
involved in the process they should be more enthusiastic toward supporting the
decision.

5. Evaluating the decision

Ms. Butcher must monitor and evaluate the performance of the store once the
decision has been implemented to determine if it working and targets are being met.
If the problem persists (sales are not increasing), then she would need to carefully
assess what went wrong. She would need to determine whether she identified the
problem correctly, whether errors were made in evaluating the various alternatives,
whether implementation was proper. She needs to review each stage of the process to
determine why objectives are not being met. She may then need to modify the
alternative chosen or revoke and implement another. The entire rational decision
making process may need to be done again.