Quantitative Techniques in Business Decision Making
Quantitative Techniques
Quantitative techniques are defined as those statistical techniques which lead to the numerical analysis of variables, affecting a decision situation, and the evaluation of alternative strategies to attain the objectives of organizations.
Features
- Measurement
- Numerical analysis
- Scientific method
- Decision making
- Options
- Improvement
Functions
- Quantification
- Analysis
- Decision making
- Deployment of resources
- Sequencing
- Optimize service
Role of Quantitative Techniques in Decision Making
- Better control
- Better efficiency
- Better coordination
- Better system
- Better decisions
Significance of Quantitative Decisions
- Simplifies decision making
- Scientific analysis
- Profit maximization
- Cost minimization
- Forecasting
Applications of Quantitative Techniques in Business Operations
- Planning
- Purchasing
- Manufacturing
- Marketing
- Human resources management
- Research and development
Qualitative Approach
The qualitative approach is concerned with the subjective assessment of attitudes, opinions, and behavior. Decision-making in such situations is a function of the decision-maker’s insight and impressions. Such an approach generates results either in a non-quantitative form or in a form which cannot be subjected to rigorous quantitative analysis.
Integration
It is a technique just reversing the process of differentiation. It involves the formula f(x) dx where f(x) is the function to be integrated.
Differential
A differential is a mathematical process of finding out changes in the dependent variable with reference to a small change in the independent variable. It involves differential coefficients of dependent variables with or without variables.
Set Theory
A set is a collection of distinct objects. This means that {1, 2, 3} is a set but {1, 1, 3} is not because 1 appears twice in the second collection. The second collection is called a multiset. Sets are often specified with curly brace notation.
Probability
Probability means possibility. It is a branch of mathematics that deals with the occurrence of a random event. The value is expressed between zero and one. Probability has been introduced in mathematics to predict how likely events are to happen. The meaning of probability is basically the extent to which something is likely to happen. This is the basic probability theory which is also used in the probability distribution, where you will learn the possibility of outcomes for a random experiment. To find the probability of a single event to occur, we should know first the total number of possible outcomes. Let us understand with an example of tossing a coin.
Probability of event to happen P(E) = Number of favorable outcomes/Total Number of outcomes
There are three ways to assign probabilities to events: the classical approach, the relative-frequency approach, and the subjective approach.
Classical Approach
If an experiment has n simple outcomes, this method would assign a probability of 1/n to each outcome. In other words, each outcome is assumed to have an equal probability of occurrence.
Relative Frequency Approach
Probabilities are assigned on the basis of experimentation or historical data.
Subjective Approach
In the subjective approach, we define probability as the degree of belief that we hold in the occurrence of an event. Thus, judgment is used as the basis for assigning probabilities.