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Chapter 1

Chapter 1.docx

Management (MGO)
Course Code
Vinh Quan

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Chapter 1 Introduction
1.1 Problem Solving and Decision Making
problem solving the process of identifying a difference between the actual and the desired state of affairs and then
taking action to resolve the difference
for problems important enough to justify the time and effort of careful analysis, the problem-solving process involves
the following 7 steps:
1. identify and define the problem
2. determine the set of alternative solutions
3. determine the criterion or criteria that will be used to evaluate the alternatives
4. evaluate the alternatives
5. choose an alternative
6. implement the selected alternative
7. evaluate the results to determine whether a satisfactory solution has been obtained
decision making the process of defining the problem, identifying the alternatives, determining the criteria, evaluating
the alternatives, and choosing an alternative
single-criterion decision problem problem in which objective is to find “best” solution with respect to just 1 criterion
multi-criteria decision problem a problem that involves more than one criterion; the objective is to find the “best”
solution, taking into account all the criteria
decision the alternative selected
1.2 Quantitative Analysis and Decision Making
the analysis phase of the decision-making process may take two basic forms: qualitative and quantitative
qualitative analysis is based primarily on the manager’s judgment and experience; it includes the manager’s intuitive
“feel” for the problem and is more an art than a science
if the manager has had experience with similar problems or if the problem is relatively simple, heavy emphasis may be
placed upon a qualitative analysis
however, if the manager has had little experience with similar problems, or if the problem is sufficiently complex, then
a quantitative analysis of the problem can be especially important consideration in the manager’s final decision
when using quantitative approach, an analyst will concentrate on quantitative facts or data associated with problem and
develop mathematical expressions that describe objectives, constraints, and other relationships that exist in problem
some of the reasons why a quantitative approach might be used in the decision-making process:
1. the problem is complex, and the manager cannot develop a good solution without the aid of quantitative analysis
2. the problem is especially important, and manager desires a thorough analysis before attempting to make a decision
3. the problem is new, and the manager has no previous experience from which to draw
4. the problem is repetitive, and the manager saves time and effort by relying on quantitative procedures to make
routine decision recommendations
1.3 Quantitative Analysis
Model Development
model a representation of a real object or situation
iconic model a physical replica, or representation, of a real object
analog model although physical in form, an analog model does not have a physical appearance similar to the real
object or situation it represents
mathematical model mathematical symbols and expressions used to represent a real situation
constraints restrictions or limitation imposed on a problem
objective function a mathematical expression that describes the problem’s objective
uncontrollable inputs the environmental factors or inputs that cannot be controlled by the decision maker
controllable inputs the inputs that are controlled or determined by the decision maker
decision variable another term for controllable input
deterministic model a model in which all uncontrollable inputs are known and cannot vary
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