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Decision Tree12
Decision Tree12
ANALYSIS
Presented by
Shrutika Bhosale 10
Jinika Jain 39
Ankita Hate 34
Pallavi Pawar 81
Satish Dahatonde 17
Vaibhav Deshmane 18
Sagar Jadhav 37
Introduction to decision theory
Decision making is an integral part of management
planning, organizing, controlling and motivation
processes. The decision maker selects one strategy
(course of action) over others depending on some
criteria, like utility, sales, cost or rate of return
Is used whenever an organization or an individual
faces a problem of decision making or dissatisfied
with the existing decisions or when alternative
selection is specified.
Decision Tree Definition
A decision tree is a graphical representation of possible
solutions to a decision based on certain conditions. It's
called a decision tree because it starts with a single box
(or root), which then branches off into a number of
solutions, just like a tree.
Decision trees are helpful, not only because they are
graphics that help you 'see' what you are thinking, but
also because making a decision tree requires a
systematic, documented thought process. Often, the
biggest limitation of our decision making is that we can
only select from the known alternatives. Decision trees
help formalize the brainstorming process so we can
identify more potential solutions.
A decision tree consists of 3 types of nodes:
1) Decision Nodes- commonly represented by
squares.
2) Chances nodes- represented by circles
3) End nodes- represented by traingles
A decision tree has only burst nodes (splitting
paths) but no sink nodes (converging paths).
Types of Decisions
Strategic Decision:-
concerned with external environment of the
organization.
Administrative Decision:-
concerned with structuring and acquisition of the
organization’s resources so as to optimize the
performance of the organization
Operating Decision:-
concerned with day to day operations of the
organization such as pricing, production scheduling
, inventory levels etc.
Elements related to all decisions
Goals to be achieved:- Objectives which the decision
maker wants to achieve by his actions
Form the tree for the entire life of the project year-
wise
The possible States of the economy and the associated probability distribution are
as follows
Should the businessman Go for selling the product in foreign market? Justify your
Answer
0.80
(870000)
0.80
(556800)
0.20
0.6
(411600)
0.80
699200
(870000)
0.20
0.4 (287600)
(129200)
0.20
0.90
-
(800000)
648000
0.10
719000
0.90
71000
0.10
Conclusion
Project decisions, even quite simple ones, can be
difficult to make because their implications are often
not certain. This is a fact of life for most project
managers, who often face situations like those
explored above: the choice of alternative Export
market and of alternative Domestic market . Each of
these decisions poses clear alternatives but murky
consequences. Uncertain consequences are best
described and analyzed using probability concepts as
part of a decision tree analysis to maximize Expected
Monetary Value or minimize expected costs to the
organization.
Decision trees allow project managers to distinguish
between decisions where we have control and
chance events that may or may not happen. It takes
account of the costs and rewards of decision options
as well as the probabilities and impacts of associated
risks. although this may be influenced by the risk
appetite of the organization. The decision tree
technique offers a powerful way of describing,
understanding and analyzing uncertainty, and can be a
valuable part of the toolkit for any project manager
who needs to make decisions where the outcome is
uncertain.
The decision tree is of great significance since it will
provide you with benefits such as clarity, specify and
other advantages mentioned. As opposed to a typical
user, the decision tree may be developed by a domain
expert. This has assisted in optimizing the decision
making performance. Nevertheless, the decision tree
is used as a resource for designing the user tasks.
Therefore, you need to use the decision tree because
of the benefits highlighted.
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