Decision making techniques are as follows:
- Marginal Analysis: Marginal analysis is an important decision-making technique as it helps in determining the level of increase in the output by addition of a variable like-machine, material, man etc. Put simply it seeks to find out the difference one extra unit of a specific input would make to the output, while other inputs remain the same. This technique is extensively used by decision-makers to analyse the impact of various alternatives in the decision-making process.
- Financial Analysis: This analysis specially focuses on the financial aspects of a problem like-the cost involved, the returns expected, the expected time required for the return, etc. This is an invaluable tool in the hands of decision-makers for evaluating various financial alternatives or financial aspects of the alternatives by analyzing cash inflow and outflow.
- Break-Even Analysis: It is another powerful tool used by economists to determine the scale of operations required to make a unit cover the costs and star making profits. This helps decision-makers to select and choose the most economical alternative.
- Ratio Analysis: This techniques is used for determining the link between two variables and for achieving a better understanding of accounting information. Ratio analysis techniques is used by financial analysis to determine various financial parameters like profitability, debt, financial strength of weakness, etc. This tool also helps in studying the relationship between past and present financial reports.
- Operation Research: This is perhaps the most scientific technique to understand industrial or commercial operations and predict outcomes. Operations research is a scientific method to understand all the systems and sub-systems involved in an operation. It used mathematical tools and modelling to predict outcomes that helps in simulating real life situations that may arise as a result of decisions. Operations research theories and models like, decision tree analysis, stimulation models, queuing model, game theory, transportation model, etc., are extremely significant for making sound decisions.
- Pareto Analysis: Pareto analysis helps in identifying the areas in the business that will help in raising maximum profits. The basic data behind Pareto principle is that 80% of the benefits can be achieved by putting 20% of efforts.
- Paired Comparison Analysis: It is helpful in framing a decision when accurate data is not available to solve a particular problem. Instead for comparing a large number of options, this approach believes n reducing all available alternatives into pairs and then selecting the better options. It is a useful tool for making comparison of related as well as unrelated options like-decisions regarding purchasing a new machine or adopting latest technology or venturing in new markets. Paired comparison analysis facilitates the decision-maker in setting priorities in case there is a dispute regarding utilization of limited resources.
- Grid Analysis/ Decision Matrix Analysis
- Force Field Analysis
- Nominal Group Technique.