Business Decision Making. Dr. Eduardo A. Morato Jr.

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СКАЧАТЬ example may be a company seeking to gain greater Cost Competitiveness in an industry that is market saturated. In such an instance, having the lowest prices in the industry, would be the main competitive edge assuming that quality is at par with others. Strategic alternatives would include:

      1.Integrating backward to reduce suppliers’ margins in the supply chain

      2.Automating the production system to save significantly on labor and, even, material costs

      3.Reducing the General and Administrative Expenses by (a) streamlining and rationalizing the organization, (b) moving to lower rental head offices, and (c) improving power and water usage efficiencies, etcetera

      In the example above, the third alternative can be done with the least investment but the alternative would not have as significant an effect on the total cost as the other two. Alternatives one and two require huge capital expenditures. The first alternative might actually require more capital but it might have the best impact on costs. However, there are also risks in backward integration because it is less familiar territory than simply automating the production process with newer technologies.

      Operationalizing alternatives may proceed from the strategy chosen by an enterprise. They answer the question “in how many ways can the strategy be implemented well?” They may also emanate from “lost opportunities” or “good problems”, such as lost sales (and, therefore, lost income opportunities). Finally, they can be the implementation steps in launching new projects, products or programs.

      In operationalizing a strategy, there are, most definitely, many possible alternative ways to do so. The business decision maker should choose the best operational approach. If a fastfood enterprise, for example, has chosen a franchising strategy to achieve its ambitious sales growth and increase income targets, operationalizing this strategy would mean making operational decisions to: (1) hire a franchising consultant or not to hire one; (2) determine which franchising terms and conditions, including royalty fees, are good for both the company and its franchisees; (3) define what the area coverage of the franchise network should be; (4) design the best logistical support system to adequately serve the franchisers; (5) either set up one big central commissary or set up several smaller ones; (6) evaluate the most effective ways of developing brand equity and preserving the quality of products and services delivered by the franchisers.

      An example of operational alternatives to prevent “lost opportunities” or to address “good problems” is a successful fastfood enterprise that is experiencing long queuing lines. The long queues lead to 10% of the customers dropping out of line and transferring to a competing fastfood outlet. In here, success becomes the “good problem”, meaning there is “too much” success. The alternatives to prevent lost opportunities may include: (1) increasing the number of cashiers; (2) re-designing the kitchen and food assembly system; (3) creating a separate customer line for receiving the food order after the cashier has taken the order and gotten paid, and after an order assembler has already packaged the items bought.

      Operationalizing new projects, product offerings or action programs requires alternative choices. In a new project, like the building of an additional warehouse, the alternative choices come from several questions: (1) do we build all of it ourselves or do we subcontract some or all of the work?; (2) do we buy the land or just lease it long term?; (3) do we sub-lease some of the warehouse space to earn income or is it better to have exclusive use of the warehouse to avoid operating complications?

      In operationalizing product offerings, the basic question might be “which products should we push in the marketplace more than the others?” For a new product the question might be: (1) do we market it using the same channels as existing products or do we try other channels; (2) how do we position the product in the marketplace; (3) what is the optimum price offering for the product?

      For action programs, such as a training and coaching program to build a unit’s competencies, the operational alternatives would include: (1) who will do the training and the coaching; (2) how do we monitor and evaluate success; (3) how intensive and extensive should the training and coaching program be?

      In summary, a good Business Case starts with a good statement of the decision to be made. If the Business Case comes from a wrong definition of the problem or opportunity at hand, then the entire effort of decision-making becomes a futile exercise.

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