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CHAPTER 3 Marketing Decision Making

and Case Analysis

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AFTER READING THIS CHAPTER

YOU SHOULD BE ABLE TO:

1. Describe each step in the decision-

making process using the
“DECIDE” method.

2. Prepare and present an analysis of

a written case.

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DEFINITION OF DECISION-MAKING

“A cognitive process resulting in the selection of a

course of action among several alternative
possibilities.”

“A rational and systematic process and that its

organization is a definite sequence of steps, each
of them in turn rational and systematic.”
— Peter Drucker

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DECISION-MAKING
PROCESS

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DECISION-MAKING PROCESS: DECIDE

Define the problem

Enumerate the decision factors

Consider relevant information

Identify the best alternative

Develop a plan for implementing

the chosen alternative
Evaluate the decision and the
decision process
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Step-1: Define the Problem

A well-defined problem outlines the framework

within which a solution can be derived

• “A problem well defined is half solved.”

— John Dewey
• Problem definition framework includes:

Success
Objectives Constraints
Measures
El Nacho Foods

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Step 2: Enumerate the Decision Factors

Enumerate 2 decision factors 2 related to

each other:

Alternative
Uncertainties
Courses of Action

Controllable by the Uncontrollable factors

decision maker such as that the manager cannot
the marketing mix influence

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Step 3: Consider Relevant Information

• Relevant information is related to the alternatives

identified affecting future events
• It includes the characteristics of:
− The industry, competitors, and consumers
− The organization (competitive strength, and position)
− The alternatives themselves

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Step 3: Consider Relevant Information

• Identifying relevant info • Two caution notes for

is difficult: a case analyst:
− Too much info − Don’t consider everything
as factual info
− Too many viewpoints
− Sometimes relevant info
− Determining what does and
must be created
doesn’t matter is a skill
learned through experience

A manager has performed a situation analysis when

steps 1 through 3 are completed

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Step 4: Identify the Best Alternative

• Matches each alternative with

the uncertainties
• A framework for • Assigns a quantitative value to
choosing best the outcome associated with
alternative is decision each match
analysis • Uses a decision tree and a
payoff table to show the
relationship among
alternatives, uncertainties, and
potential outcomes

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Step 4: Identify the Best Alternative

Example: El Nacho Foods

Alternative
Uncertainties
Courses of Action
about Competitors
for Frozen Dinners

• Reduce price • Maintain lower price

• Maintain price • Reduce price further

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EXHIBIT 3.1: DECISION TREE FOR

EL NACHO FOODS

Company Competitive Financial

Action Response Outcome

Maintain
$150,000
price
Reduce price
Reduce
$110,000
price further

Maintain
$175,000
price
Maintain price
Reduce
$90,000
price further
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EXHIBIT 3.2: PAYOFF TABLE FOR

EL NACHO FOODS

Uncertainties
Competitors Competitors
Maintain Price Reduce Price
(Probability = 0.9) (Probability = 0.1)

Reduce price $150,000 $110,000

Alternatives

Maintain price $175,000 $90,000

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Step 4: Identify the Best Alternative

• A payoff table computes the “expected monetary

value” (EMV) for each alternative
• The EMV is calculated as follows:

EMV = ( Outcome of
Uncertainty1 × Probability (p)
of Uncertainty1 ) +

( Outcome of
Uncertainty2 × Probability (p)
of Uncertainty2 ) + …

• EMVPI = EMV of Perfect Information

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EXHIBIT 3.3: DECISION ANALYSIS AND THE

VALUE OF INFORMATION
Payoff Table Uncertainties
Competitors Competitors
EMV
Maintain Price Reduce Price
Calculation
(Probability = 0.9) (Probability = 0.1)

A1: Reduce price $150,000 $110,000 $146,000

Alternatives
A2: Maintain price $175,000 $90,000 $166,500

EMVA1 = (0.9 × $150,000) + (0.1 × $110,000) = $146,000

EMVA2 = (0.9 × $175,000) + (0.1 × $90,000) = $166,500
EMVCertainty = (0.9 × $175,000) + (0.1 × $110,000) = $168,500
EMVPI = EMVCertainty – EMVBest alternative
EMVPI = $168,500 – $166,500) = $2,000
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Step 4: Identify the Best Alternative

Decision analysis is important for 4 reasons:

1. Is a fundamental tool for considering “what if”
situations
2. Forces the manager to quantify outcomes
associated with specific actions
3. Is useful in a variety of settings
4. Can be used in determining the value of “perfect”
information

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Step 5: Develop a Plan for Implementing

the Chosen Alternative

An implementation plan involves:

• Allocating resources (marketing, financial, and
production)

• Time needed to develop a marketing plan

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Step 6: Evaluate the Decision and the

Decision Process

While evaluating, ask two questions:

• Was a decision made?
• Was the decision proper given the situation identified in the
case?
− Insufficient information present?

− Failure to consider and interpret information?

− Logical assumptions made regarding data gaps?

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Step 6: Evaluate the Decision and the

Decision Process

Ask 5 questions of the decision-making process:

1. Was the problem defined adequately?
2. Were all the pertinent alternatives and uncertainties
identified? Were the assumptions realistic?
3. Was all the relevant information considered?
4. Was an appropriate course of action recommended? Was the
logic consistent? Was any important piece of information
overlooked?
5. How can the recommendation be implemented?

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PREPARING AND
PRESENTING
A CASE ANALYSIS

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PREPARING AND PRESENTING

A CASE ANALYSIS

Approaching the Case

First reading. Become familiar with the

situation of the organization:
 Identify insights into the problem

 Obtain background information on the

environment and organization

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PREPARING AND PRESENTING

A CASE ANALYSIS

Approaching the Case

Second reading. Pay attention to key facts

and assumptions:
 Determine relevance and reliability of
the data
 Obtain background information on
the environment and organization

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PREPARING AND PRESENTING

A CASE ANALYSIS

Approaching the Case

Avoid these pitfalls:

 Do not rush to a conclusion

 Do not “work the numbers” until their meaning

and derivation are understood

 Do not confuse supposition with fact

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EXHIBIT 3.4a: MARKETING CASE

ANALYSIS WORKSHEET

Formulating the Case Analysis

1. What is the nature of the industry structure,

conduct, and performance?

2. Who are the competitors, and what are

Nature of the their strengths and weaknesses?
Industry,
3. How do consumers buy (why, where, when,
Market, and how) in this industry or market?
Buyer
4. Can the market be segmented? How? Can
Behavior the segments be quantified?
5. What are the requirements for success in
this industry?
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EXHIBIT 3.4b: MARKETING CASE

ANALYSIS WORKSHEET

Formulating the Case Analysis

1. What are the organization’s mission, objectives,
and distinctive competency?
2. What is its offering to the market? How
can its past and present performance be
characterized? What is its potential?
3. What is the situation in which the manager or
The organization finds itself?
Organization 4. What factors have contributed to the present
situation?
5. What are its financial, human, and material
resources?
6. What is the “fit” between it and its environment
based on the SWOT?
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EXHIBIT 3.4c: MARKETING CASE ANALYSIS

WORKSHEET

Formulating the Case Analysis

1. What actions are available to the

firm based on the situation analysis?

2. What are the costs and benefits

A Plan of action in both qualitative and
of Action quantitative terms?
3. Is there a disparity between what the
organization wants to do, should do,
can do, and must do?

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EXHIBIT 3.4d: MARKETING CASE ANALYSIS

WORKSHEET

Formulating the Case Analysis

1. What will be the buyer, trade, and

competitive response to each course
of action?
2. How will each course of action satisfy
buyer, trade, and organization
requirements?
Potential 3. What is the potential profitability of
Outcomes each course of action?
4. Will the action enhance or reduce the
organization’s ability to compete in the
future?
5. What is the best course of action to
pursue?
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PREPARING AND PRESENTING

A CASE ANALYSIS

Formulating the Case Analysis

If using teams:

 Create a balanced team whose member’s skill

sets complement one another (writing, oral
presentation, financial, etc.)

 Be committed to the task and dependable

 Avoid “groupthink”
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COMMUNICATING THE CASE

ANALYSIS

Class Discussion

 Case preparation requires 4-5 hours

 Bring notes to class
 Carefully listen to the viewpoints of other
students during the discussion of the case

 Prepare a short summary of the case after

discussing it in class
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COMMUNICATING THE CASE

ANALYSIS

Oral Presentation

 Rehearse the presentation

 Visual aids do not replace the oral presentation

• Do not read slides to the audience
• Do not use too many graphics, colors,
and transitions

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COMMUNICATING THE CASE

ANALYSIS

Oral Presentation

 Slides should cover the following:

• Presentation title and presenters’ names
• Outline of the presentation
• Key problems and strategic issues that management
needs to address
• Analysis of the organization’s situation or problem
• Recommendations and supporting reasoning
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COMMUNICATING THE CASE

ANALYSIS

Written Report

 Be carefully organized and grammatically

correct
 Has three major sections:
• Strategic problem and issue identification
• Analysis and evaluation
• Recommendations
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permission of the publisher. Printed in the United States of America.

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