On solutions that are better than most

A programmatic approach to solving decision problems by the use of ‘better than most’ (BTM) solutions is introduced. The BTM approach is contrasted to approaches that seek a solution whose outcome would be the best of all outcomes for feasible solutions, again according to criteria taken to represent the decision maker's objectives. This BTM approach is illustrated in terms of a decision problem in binary decision variables. This is followed by a discussion of (1) some of the probabilistic aspects of BTM solutions, including calculational experience, (2) a central BTM problem, akin to the problem of finding optimal methods in the more traditional approaches, (3) some ad hoc methods for overcoming this and other problems associated with the BTM approach, and (4) similarities and differences between the BTM approach and other approaches.     

Curricula and State of the Profession

Most of us have encountered problems in developing an effective quantitative analysis program for our business schools in the United States. We have often found managers very reluctant to adopt QA techniques; on the other hand, students, although not reluctant, lacked the necessary mathematical background. During the academic year 1970–71, the authors assisted in the development of a QA department in the business school of a developing nation which offers both resident coursework for graduate students and executives seminars for businessmen. Both the students and the executives had the necessary mathematical background for rapid understanding of QA techniques. The executives appeared eager to use QA in their business operations and the students were highly motivated toward the application of QA to business problems. Our purpose in this article is not to convince all the QA professors to teach in underdeveloped nations, but to furnish information which is likely to be useful to those who attempt to establish similar QA programs in other developing countries.     

Classifying Revenue Management: A Taxonomy to Assess Business Practice*

As revenue management (RM) techniques evolve there is a need to take stock of how organizations practice RM and the interactions among techniques. This would help practitioners and researchers better understand how RM practice is influenced by the business setting, including those not traditionally associated with advanced RM techniques. Also, it would facilitate investigations of which practices lead to better outcomes in different contexts. Research to date has focused on individual techniques within individual business settings, with limited attention to the range of environments in which RM practice occurs. This suggests a need for a common framework to classify and assess differences in practice. In this article, we present a taxonomy which comprises (i) seven indicators of practice and (ii) a decision tree to measure RM across diverse businesses. We test the classification system in a survey of 232 businesses. Results show the taxonomy provides a comprehensive view of RM practice, with meaningful discrimination across settings. Findings also offer insight into how practices vary across different settings. Our taxonomy contributes to future research by facilitating systematic comparisons of RM practices, the settings in which it is adopted, and its impact on performance.     

SUCCESSFUL MODELS I HAVE KNOWN*

Formal education equips the modern decision scientist with an ample bag of mathematical tools. Among these are a wide variety of models, supplemented by techniques for creating new models and augmenting old ones. The purpose of a model, however, is not to serve only as a classroom exercise, but, rather, to represent reality in mathematical terms. Therefore, the performance of a model under real-life conditions determines its success or failure. In this paper, the author examines the characteristics of successful models, concentrating on the potential pitfalls in both the formulation and implementation stages. Finally, the author discusses the implications of his views for business schools, especially in terms of the improvements in course requirements and teaching techniques which are needed to prepare students of quantitative methods for careers as effective decision scientists.     

Real Options in Management and Organizational Strategy: A Review of Decision‐making and Performance Implications

This paper contributes to the debate on the role of real options theory in business strategy and organizational decision‐making. It analyses and critiques the decision‐making and performance implications of real options within the management theories of the (multinational) firm, reviews and categorizes the organizational, strategic and operational facets of real options management in large business settings. It also presents the views of scholars and practitioners regarding the incorporation and validity of real options in strategy, international management and business processes 1 . The focus is particularly on the decision‐making and performance attributes of the real options logic concerning strategic investments, governance modes and multinational operations management. These attributes are examined from both strategic and operating perspectives of decision‐making in organizations, also with an overview of the empirical evidence on real options decision‐making and performance.     

Pioneering Process Research: Andrew Pettigrew's Contribution to Management Scholarship, 1962–2014

This paper assesses Andrew Pettigrew's contribution to management scholarship. This review addresses the process, content, and context of his research career. Chronologically, the process will be subdivided into three distinct phases: the period leading up to the establishment of the Centre for Corporate Strategy and Change, Pettigrew's time with the Centre, and Pettigrew's research since leaving the Centre. The content of Pettigrew's research focussed on big problems and emerging phenomena such as decision‐making, organisational culture, organisation development, strategic change, human resource management, competitiveness, new public management, boards of directors, innovative forms of organising, high‐performing research teams, and business schools. His contextualist methodology for process research will be explicated. Pettigrew's contribution will be contextualised by comparing it with contemporary research. The paper concludes that there is still a need not only to examine big problems and emerging phenomena but also to provide a processual understanding of management reality. There is a need to further develop process research methodologies such as Pettigrew's contextualism, especially with respect to process research methods.     

AN EMPIRICAL EXAMINATION OF THE BIASING EFFECTS OF FRAMING ON BUSINESS DECISIONS*

This paper presents results of three studies testing whether decision bias due to framing, found in consumer purchase contexts, also would occur in a business setting. In the first study, business-student subjects displayed framing-induced decision bias just as subjects had in an earlier study by Tversky and Kahneman [12]. When the consumer problem was recast into a business decision in the second study, student subjects trained to handle the problem still revealed bias, although to a lesser extent. In the third study, experienced business managers revealed the same pattern of decision bias as the student subjects. Implications of this bias for business decision makers are discussed.     

信用评分模型的设计与决策分析

本文对商业银行信贷业务中的贷款者的信用问题,运用决策分析提出了信用评分的设计原理及临界分值的确定方法,给出了最优贷款策略的期望收益和风险的计算公式。最后,以一例说明之。     

Customer Learning Processes,Strategy Selection,and Performance in Business‐to‐Business Service Firms*

Learning about customers takes place through relevant dialogues with those customers, also known as customer relationship management (CRM). As relationships develop, information about the customer is gathered in the firm's customer information systems (CIS): the content, processes, and assets associated with gathering and moving customer information throughout the firm. This research develops a measure of CIS management capabilities based on learning organization theory and measured by the ability to get, store, move, and use information throughout the business unit. This measure is then used to analyze customer learning processes and associated performance in the context of marketing strategic decision making. This study of 209 business services firms finds that generic marketing strategy positioning (low‐cost and differentiation) and the marketing tactics of personalization and customization are related to CIS development. Customer information systems development in turn is associated with higher levels of customer‐based performance, which in turn is associated with increased business growth. Since the strongest association with customer‐based performance is strategy selection, the long‐term benefits of the knowledge gained from the CIS may be in the ability to assist in measuring customer‐based performance, rather than in the ability to immediately contribute to performance. Finally, for these firms, customization and personalization are not directly associated with performance and thus may not be necessary to support every firm's marketing strategy.     

Supplier selection with multiple criteria in volume discount environments

Supplier selection is a multi-criteria decision making problem which includes both qualitative and quantitative factors. In order to select the best suppliers it is necessary to make a trade-off between these tangible and intangible factors some of which may conflict. When business volume discounts exist, this problem becomes more complicated as, in these circumstances, buyer should decide about two problems: which suppliers are the best and how much should be purchased from each selected supplier. In this article an integrated approach of analytical hierarchy process improved by rough sets theory and multi-objective mixed integer programming is proposed to simultaneously determine the number of suppliers to employ and the order quantity allocated to these suppliers in the case of multiple sourcing, multiple products, with multiple criteria and with supplier's capacity constraints. In this context, suppliers offer price discounts on total business volume, not on the quantity or variety of products purchased from them. A solution methodology is presented to solve the multi-objective model, and the model is illustrated using two numerical examples.     

Intuitive versus optimal solutions to some problems in distribution

This paper is concerned with the issue of assessing the relative performance of unaided decision-makers and model-based optimal solutions to managerial decision problems. This has important implications for project selection, research direction and management training. Some possible approaches designed to achieve such comparisons are examined and examples given. Some experimental studies are reported, set in the context of distribution management, which make use of one of the research strategies discussed.     

An environmental decision model for dynamic planning

In the complex, rapidly changing environment facing the modern business enterprise, it has become increasingly difficult to make meaningful predictions concerning future activities. As such, it is especially important for the decision maker to seek means of gathering and evaluating information. Due to the immense amounts of subjective data, the need arises for the development of valid techniques for identifying and quantifying relevant information.Writers in the area of organization theory have emphasized the importance of the relationship between and organization and processes occurring within its environment to the extent that these environmental processes and their impact are considered vital to the ultimate survival of the firm. The Graphical Evaluation and Review Technique (GERT) is an analytical process upon which simulation models can be developed to examine the effect of more sophisticated information processing. The GERT technique serves as an input to decision making and for purposes of analysis will be studied under conditions of the disturbed reactive environment.The essential method upon which this study is based is the development of a model designed to capture the characteristics of the environment. The model in turn is tested under various conditions and changing sets of information to arrive at some idea of the possible implications for decision making under a situation affected by more and different information usage.     

Estimating Conditional Probabilities of Terrorist Attacks: Modeling Adversaries with Uncertain Value Tradeoffs

Many analyses conducted to inform security decisions depend on estimates of the conditional probabilities of different attack alternatives. These probabilities are difficult to estimate since analysts have limited access to the adversary and limited knowledge of the adversary’s utility function, so subject matter experts often provide the estimates through direct elicitation. In this article, we describe a method of using uncertainty in utility function value tradeoffs to model the adversary’s decision process and solve for the conditional probabilities of different attacks in closed form. The conditional probabilities are suitable to be used as inputs to probabilistic risk assessments and other decision support techniques. The process we describe is an extension of value‐focused thinking and is broadly applicable, including in general business decision making. We demonstrate the use of this technique with simple examples.     

Can business learn from wargames?

The value of planning, particularly strategic planning, has long been recognized by both the military and business. Recently, the military has made significant contributions in the area of strategic decision making through the use of war games. Business managers may be able to expand their strategic decision-making judgment by employing the wargaming technology developed by the military. If the wargaming concept is embraced by business, it must serve, as it does in the military, as an aid to decision-making rather than as the decision itself.     

Competing on Time: An Integrated Framework to Optimize Dynamic Time‐to‐Market and Production Decisions

This study develops a comprehensive framework to optimize new product introduction timing and subsequent production decisions faced by a component supplier. Prior to market entry, the supplier performs process design activities, which improve manufacturing yield and the chances of getting qualified for the customer's product. However, a long delay in market entry allows competitors to enter the market and pass the customer's qualification process before the supplier, reducing the supplier's share of the customer's business. After entering the market and if qualified, the supplier also needs to decide how much to produce for a finite planning horizon by considering several factors such as manufacturing yield and stochastic demand, both of which depend on the earlier time‐to‐market decision. To capture this dependency, we develop a sequential, nested, two‐stage decision framework to optimize the time‐to‐market and production decisions in relation to each other. We show that the supplier's optimal market entry and qualification timing decision need to be revised in real time based on the number of qualified competitors at the time of market‐entry decision. We establish the optimality of a threshold policy. Following this policy, at the beginning of each decision epoch, the supplier should optimally stop preparing for qualification and decide whether to enter the market if her order among qualified competitors exceeds a predetermined threshold. We also prove that the supplier's optimal production policy is a state‐dependent, base‐stock policy, which depends on the time‐to‐market and qualification decisions. The proposed framework also enables a firm to quantify how market conditions (such as price and competitor entry behavior) and operating conditions (such as the rate of learning and inventory/production‐related costs) affect time‐to‐market strategy and post‐entry production decisions.