Decision Making SkillsDecision Making Skills

�� Purpose of this course: Purpose of this course: 1.1. Build your analytical skillsBuild your analytical skills2.2. Build your capabilities to take decisionsBuild your capabilities to take decisions3.3. Understand various issues affecting an Understand various issues affecting an 3.3. Understand various issues affecting an Understand various issues affecting an

organizationorganization--Environmental issues; Functional Environmental issues; Functional issuesissues

4.4. This course would use what you have learnt in This course would use what you have learnt in the past 3 semesters plus this semesterthe past 3 semesters plus this semester--it will it will utilize your theoretical knowledge in real life utilize your theoretical knowledge in real life business situations (Cases)business situations (Cases)

The courseThe course�� The course is designed to serve the needs of business The course is designed to serve the needs of business

organizations today.organizations today.�� Business organizations today are facing rapidly Business organizations today are facing rapidly

changing environments changing environments ––e.g.e.g.--RIM’s BlackBerry; Retail RIM’s BlackBerry; Retail in India, etc.in India, etc.

�� Business policy making has become a more formal Business policy making has become a more formal �� Business policy making has become a more formal Business policy making has become a more formal ,rather than ad,rather than ad--hoc process. hoc process.

�� Emphasis has shifted to integration of functional areas Emphasis has shifted to integration of functional areas in a rapidly changing environment : need for a powerful in a rapidly changing environment : need for a powerful way of thinking to resolve strategic issues (long term way of thinking to resolve strategic issues (long term issues)issues)

�� Students doing this course would have completed a set Students doing this course would have completed a set of core functional area courses, so that they can of core functional area courses, so that they can integrate their knowledge in solving broadintegrate their knowledge in solving broad--based cases.based cases.

�� Main method used in this course: Case Main method used in this course: Case StudiesStudies

�� Cases would be such that they contain Cases would be such that they contain �� Cases would be such that they contain Cases would be such that they contain elements of various specializations, i.e. elements of various specializations, i.e. Marketing, HR, finance, etc. Marketing, HR, finance, etc.

�� Your final paper will contain one or two Your final paper will contain one or two case studies.case studies.

The Case Study Method of The Case Study Method of teaching at Post Graduate Levelteaching at Post Graduate Level

What is a case study ? What is a case study ?

�� A description of a real life or simulated business A description of a real life or simulated business situation situation

�� It normally presents a ‘problem’ and a need to It normally presents a ‘problem’ and a need to take a decision to solve the problemtake a decision to solve the problemtake a decision to solve the problemtake a decision to solve the problem

�� Eg: The Kingfisher Airlines case: why did the Eg: The Kingfisher Airlines case: why did the company face the financial difficulties? ; how company face the financial difficulties? ; how can the company come out of these problems? can the company come out of these problems?

Some RulesSome Rules�� There are usually no ‘right’ or ‘wrong’ answers: There are usually no ‘right’ or ‘wrong’ answers: there are however, ‘good’, bad’ and ‘stupid’ there are however, ‘good’, bad’ and ‘stupid’ answers .answers .

�� One major example of Stupid answers is:One major example of Stupid answers is:�� One major example of Stupid answers is:One major example of Stupid answers is:a mere repetition of the case a mere repetition of the case �� Basic answers such as : ‘offer customer Basic answers such as : ‘offer customer satisfaction’; ‘good quality’; ‘reduce prices’; ‘fight satisfaction’; ‘good quality’; ‘reduce prices’; ‘fight competition’ : would not earn high marks competition’ : would not earn high marks unlessunlessquality is really one of the main reasons and quality is really one of the main reasons and student demonstrates student demonstrates how how quality should be quality should be improved. improved.

Good answers versus Bad answersGood answers versus Bad answers

�� However, in the case of Kingfisher Airlines, giving a However, in the case of Kingfisher Airlines, giving a recommendation to “demand for a government bailrecommendation to “demand for a government bail--out” out” should be marked less than recommendations which are should be marked less than recommendations which are more more proactiveproactive: e.g.: cost cutting; redefining routes : e.g.: cost cutting; redefining routes which the airlines will operate on; organization structure which the airlines will operate on; organization structure which the airlines will operate on; organization structure which the airlines will operate on; organization structure change; refocusing on what the ‘Kingfisher flying change; refocusing on what the ‘Kingfisher flying experience’ is: Kingfisher Red competes with experience’ is: Kingfisher Red competes with KingfisherKingfisher——this way, you would be solving the issues this way, you would be solving the issues which have caused Kingfisher its problems.which have caused Kingfisher its problems.

�� How well the student ‘justifies’ his/her recommendation How well the student ‘justifies’ his/her recommendation is important is important

Problems versus SymptomsProblems versus Symptoms

�� Fix the problems not the symptomsFix the problems not the symptoms

�� Examples: Examples:

�� A company is facing high level of absenteeism. A company is facing high level of absenteeism. �� A company is facing high level of absenteeism. A company is facing high level of absenteeism.

�� A company is losing market shareA company is losing market share

�� A company is facing shortage of working capitalA company is facing shortage of working capital

�� By finding the problem behind the symptom, can By finding the problem behind the symptom, can accurate decisions be taken. accurate decisions be taken.

The case ‘problem’The case ‘problem’ Fixing the Fixing the symptom:symptom:

Fixing the Fixing the Problem:Problem:

Increasing Increasing absenteeismabsenteeism

Make attendance Make attendance necessary; reduce necessary; reduce allowable leaves (CLs)allowable leaves (CLs)

Improve motivation Improve motivation levels (how ..levels (how ..--restructuring jobs)restructuring jobs)

Losing Market shareLosing Market share Gain back market Gain back market Customer needs have Customer needs have Losing Market shareLosing Market share Gain back market Gain back market share through sales share through sales promotion; price cutspromotion; price cuts

Customer needs have Customer needs have changed: new product changed: new product features are needed features are needed (innovation needed)(innovation needed)

Lack of adequate Lack of adequate working capitalworking capital

(WC = CA(WC = CA--CL)CL)

Borrow ; keep cash Borrow ; keep cash reservesreserves

Creditors not paying Creditors not paying on time; surplus on time; surplus inventory (cash locked)inventory (cash locked)

A CaseA Case�� A business hotel , ABC Hotels is a budget business A business hotel , ABC Hotels is a budget business

hotel ,enjoys occupancy of 70% during most of the hotel ,enjoys occupancy of 70% during most of the year, which as per industry standards is very high. year, which as per industry standards is very high.

�� In March, occupancy rates even touch 80%. In March, occupancy rates even touch 80%. �� Coincidentally, in March , a cricket match is scheduled Coincidentally, in March , a cricket match is scheduled

in the same city as the hotel. in the same city as the hotel. �� The cricket event managing team approaches the hotel The cricket event managing team approaches the hotel

with a proposition: to allow members of cricket teams with a proposition: to allow members of cricket teams with a proposition: to allow members of cricket teams with a proposition: to allow members of cricket teams & managers of the cricket association to stay with & managers of the cricket association to stay with group booking discount for of 10% for 10 days;group booking discount for of 10% for 10 days;

�� in return of which the event management team will in return of which the event management team will give promotion worth Rs. 1,50,000 free to the hotel. give promotion worth Rs. 1,50,000 free to the hotel.

�� The hotel has 300 roomsThe hotel has 300 rooms

�� The hotel charges: Rs. 4000 per night/roomThe hotel charges: Rs. 4000 per night/room

�� Cricket event management is asking for group booking Cricket event management is asking for group booking of 80 rooms @ room charge discount of 10% for 10 of 80 rooms @ room charge discount of 10% for 10 days in March for which a promise of free promotion of days in March for which a promise of free promotion of the hotel worth Rs. 1,50,000 is offered.the hotel worth Rs. 1,50,000 is offered.the hotel worth Rs. 1,50,000 is offered.the hotel worth Rs. 1,50,000 is offered.

�� Question: Should the hotel accept the proposal ? (see Question: Should the hotel accept the proposal ? (see next slide for more details)next slide for more details)

�� Groups are given 15 mins to come up with a solution.Groups are given 15 mins to come up with a solution.

SolutionSolution

�� In March, occupancy rates = 80%In March, occupancy rates = 80%

�� Total rooms = 300Total rooms = 300

�� Rooms forecasted to be filled in March= 240Rooms forecasted to be filled in March= 240�� Rooms forecasted to be filled in March= 240Rooms forecasted to be filled in March= 240

�� Remaining rooms (unoccupied)= 60Remaining rooms (unoccupied)= 60

�� Cricket event mgt wants = 80 roomsCricket event mgt wants = 80 rooms

�� While unoccupied rooms available are 60; hotel While unoccupied rooms available are 60; hotel needs to keep aside 20 rooms more for the needs to keep aside 20 rooms more for the cricket event management booking.cricket event management booking.

The 20 RoomsThe 20 Rooms�� Without discount, earnings = 20 x 4000 x Without discount, earnings = 20 x 4000 x 10 (days)= Rs. 8,00,00010 (days)= Rs. 8,00,000

�� With discount= 20 x 3600 x10 = Rs. With discount= 20 x 3600 x10 = Rs. 6,20,0006,20,000

�� Loss= Rs. 1,80,000Loss= Rs. 1,80,000

�� This loss should be covered by the ‘free’ This loss should be covered by the ‘free’ promotion which is only Rs. 1,50,000 . promotion which is only Rs. 1,50,000 .

�� FinanciallyFinancially, deal makes no sense, deal makes no sense

�� Marketing wise:Marketing wise:�� Deal makes no sense as marketing is about Deal makes no sense as marketing is about profitability too.profitability too.

�� Hotel would refuse 20 rooms to guests that Hotel would refuse 20 rooms to guests that might be normally occupying rooms; this might might be normally occupying rooms; this might not work well for the long term relationship not work well for the long term relationship not work well for the long term relationship not work well for the long term relationship

�� The core targetThe core target——businessmen and businessmen and professionals may feel alienated; cricket teams professionals may feel alienated; cricket teams staying could interfere with their usual staying could interfere with their usual experience with the hotel. experience with the hotel.

Hence, the management should refuse the deal.Hence, the management should refuse the deal.

HR factorsHR factors�� Risks: Personnel may give more attention to Risks: Personnel may give more attention to cricket celebrities , ignoring target market cricket celebrities , ignoring target market customerscustomers

�� Security personnelSecurity personnel

�� Cricket association and team members would Cricket association and team members would �� Cricket association and team members would Cricket association and team members would have different needs as compared to regular have different needs as compared to regular business traveler: do hotel personnel have the business traveler: do hotel personnel have the skills to look after these needs? skills to look after these needs?

�� Gym: Do we have enough trainers/supervisors?Gym: Do we have enough trainers/supervisors?