Harimann International Case SolutionÂ
Possibility 4-Acceptance of Order (with delay, 30%)
There is another possibility that the order will be delayed due to any circumstances, and in this situation, it is expected that Pioneer will pay only 30% of the original amount payable under the order. Thus, the revenue has now decreased to 148,020 Indian rupees. The incentives offered by the government are only applicable on the revenues that exceed 150,000 Indian rupees, thus in this situation the incentive is also in loss due to the delay. The resultant loss will be 311,380 Indian rupees.
Possibility 5- Acceptance of Order (with delay, 20%)
The last possible situation is when there is a delay in the completion and shipment of order, which would then result in the payment of only 20% of the original amount by the Pioneer. Hence, this would result in highest possible loss with 98,680 of revenue and resultant loss of 360,720 Indian rupees. In this situation, same condition is applied as in previous situation, which reflects that the governmentâ€™s incentives will be lost.
|Total||At 50%||At 30%||At 20%|
|Other direct costsÂ||7,000||7.000||7,000||12,000||5,500||9,000||47500|
Can Decision Trees be Used Effectively?
Decision tress can be used effectively in any analysis, which involves multiple variables. Each variable has its own effect on the overall decision. Through decision tree analysis, one can make predictions about the future outcome of any decision that has been taken. It also explains the situation that is under consideration, as well as it gives a broader view of the entire situation which helps to make an effective decision after analyzing of different multiple options. This approach helps in identifying the multiple outcome and alternatives that are available and its impact. The human mind is not capable of making a decision while analyzing all the possible outcomes and multiple factors all at a time. This drawback is successfully overcome through the use of decision tree presentation and chart analysis.The decision tree can incorporate in itself the numerical as well as categorical data. It uses algorithm in order to split the data based on alternatives into branches. Each branch is then analyzed separately and then its impact is spread over the entire tree.Â (Decision Tree, n.d)
By using the decision tree, the uncertain factors can be incorporated into the decision model mathematically and efficiently. The values that are calculated through decision making can provide better insight into the matter which then results in better decision making. It provides a systematic way to perform decision analysis and helps to maintain consistency and less dependence on few variables. With more complex data and number of variables, it provides systematic and structured model to effectively analyze the entire situation and thus, this results in effective decision making. Moreover, it is used to assess the risks which are associated with the uncertain events and by assessing the overall risk the option which shows that greater risks are eliminated until one best option is derived.
Analysis and Evaluation
For the analysis of all five stated situations that Dhawan is expecting, the decision tree was formed which gives the relative values and expected values from each situation. The situations are explained below:……………….
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