Objectives After studying this unit, you should be able to: • • • • • • • understand the complexity of today's managerial decisions know the meaning of quantitative techniques know the need of using quantitative approach to managerial decisions appreciate the role of statistical methods in data analysis know the various models frequently used in operations research and the basis of their classification have a brief idea of various statistical methods know the areas of applications of' quantitative approach in business and management.
Quantitative Decision Making – An overview
Structure 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 Introduction Meaning of Quantitative Techniques Statistics and Operations Research Classification of Statistical Methods Models in Operations Research Various Statistical Methods Advantages of Quantitative approach to Management Quantitative Techniques in Business and Management Use of Computers
1.10 Summary 1.11 Key Words 1.12 Self-assessment Exercises 1.13 Further Readings
You may be aware of the fact that prior to the industrial revolution individual business was small and production was carried out on a very small scale mainly to cater to the local needs. The management of such business enterprises was very different from the present management of large scale business. The information needed by the decision-maker (usually the owner) to make effective decisions was much less extensive than at present. Thus he used to make decisions based upon his past experience and intuition only. Some of the reasons for this were: i) The marketing of the product was not a problem because customers were, for the large part, personally known to the owner of the business. There was hardly any competition in the business. ii) Test marketing of the product was not needed because the owner used to know the choice and requirement of the customers just by personal interaction. iii) The manager (also the owner) also used to work with his workers at the shopfloor. He knew all of them personally as the number was small. This reduced the need for keeping personal data. iv) The progress of the work was being made daily at the work centre itself. Thus production records were not needed. v) Any facts the owner needed could be learnt direct from observation and most
Basic Mathematics for Management
of what he required was known to him. Now, in the face of increasing complexity in business and industry, intuition alone has no place in decision-making because basing a decision on intuition becomes highly questionable when the decision involves the choice among several courses of action each of which can achieve several management objectives simultaneously. Hence there is a need for training people who can manage a system both efficiently and creatively. Quantitative techniques have made valuable contribution towards arriving at an effective decision in various functional areas of management-marketing, finance, production and personnel. Today, these techniques are also widely used in regional planning, transportation, public health, communication, military, agriculture, etc. Quantitative techniques are being used extensively as an aid in business decisionmaking due to following reasons: i) Complexity of today's managerial activities which involve constant analysis of existing situation, setting objectives, seeking alternatives, implementing, coordinating, controlling and evaluating the decision made. ii) Availability of different types of tools for quantitative analysis of complex managerial problems. iii) Availability of high speed computers to apply quantitative techniques (or models) to real life problems in all types of organisations such as business, industry, military, health, and so on. Computers have played an important role in arriving at the optimal solution of complex managerial problems both in terms of time and cost. In spite of...