Custom Decision of Uncertainty Paper essay paper sample
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The area of decision making for business is very critical; it is actually the foundation for the success or the downfall of a business venture. However, business decision making should not be haphazard. It should be scientific, planned, strategic and organized. It is thus very important for a business to make date-based decisions that is decisions that have been researched so as to reduce uncertainty. One of the basic ways of making informed decisions revolves around different concepts of probability. Although Salaman (2001) writes that, decision making overlaps strategic management, any business department involved in decision making ought to be guided by researched data. According to Salaman, businesses are becoming more complex, modern, structurally and functionally differentiated and therefore an imperative rationality in attaining their strategic goal: profit (Salaman, 2001). With regard to the subject matter, probability-based decision making has been intrinsically investigated- not just personal and emotional views about how things should be run.
Probability is the numerical measure of possibility, likelihood or chance and not merely a measure of qualitative relationships between phenomena. According to Barnett (1999), probability can be classified as per different viewpoints thus we have classical, frequentist, logical and subjective probability. Along the same line of thought, Baker (1981) describes two major probability concepts namely the Relative Frequency Concept and the Subjective Probability Concept which shall form the nucleus of this investigation. The Relative Frequency Concept entails outcomes of an event or a phenomenon after many unbiased trials. The most popular examples in Mathematics are the tossing of a coin and the rolling of a dice. A decision based on this kind of probability is 'long-run tendency' or the most frequent of the outcomes. In business, this is easily obtainable from opinion poll or research data presentation methods like graphs and charts and other indicators of success.
However, business needs certainty and calculated possibility as opposed to a utopian kind of an assumption. The Subjective Probability Concept applies what Baker calls the property of 'recognized fallibility'. When a business person estimates their profit for the following month as, for instance, $100 million, the subjective estimation must have been informed by calculation of intricacies to be involved for instance in production and distribution. It is actually an indicator of the assessor's belief in the probable outcome. The two concepts shall be made manifest in the herein described investigation of Hungarian beer market. The uncertainty is to device the best marketing strategy in a market with swelling competition.
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An Hungarian-based beer-producing company X is facing some stiff competition from similar companies operating in the same market. It was obvious that the company made low profits because their production capacity was very low and that their marketing efforts were very dilapidated. The management committee, in deliberating the course of action of marketing their product Y and increasing their profit, decides to do a survey on beer consumption and also assess citizen's attitudes towards certain brands. The following information on beer production was retrieved from the Association of Hungarian Beer producers: Borsodi Beer Brewery Closed Ltd (2.2*106 hl), Brau Union Hungary Open Ltd (1.56*106 hl), Dreher Beerbreweries Closed Ltd (2.8*106 hl) and Pecs Beer brewery Closed Ltd (0.89*106 hl). In addition, per capita beer consumption in 1990 was 105.1 litres but has reduced to 7.1 litres/capita since after 2005. It is also known that Hungary-made beer is generally less consumed as opposed to that from other countries- importation rate has now reached 15.5% (Hungarian Central Statistical Office, 2006).
The survey was to focus on the general beer consumption trends and establishing the socio-economic statuses of the consumers. To tie the objectives with the company's challenge, it was also to be established their brand loyalty and availability (brand Y in mind). The sample was as follows: Male 52%, female 48% with emphasis on 18-25 years (64%), those living in other towns other than the capital (35%), those who had accomplished high school (71%) and non-married (41%). A glance at the results had it that 60% of consumers took beer at least one a week, the age of becoming a regular beer drinker was between 16-25 years, the most popular brands were those from countries to the West of Europe and that among the 26% of the regular consumers who tried ten different brands, a very low percentage had tried brand Y. When reasons for non-trial for brand Y were investigated, non-availability was found out to be the basic reason for its (brand's) non-consumption. Packaging and the manufacture's image was also a key reason given.
By applying the Subjective Probability Concept, it follows that the most 'recognized fallibility' or the calculated decision was to target the young people (16-25 years) in the marketing of the beer and to set up production plants outside the capital. In addition, distribution had to be intensified and a profit increase realized. A profit had to be realized since more beer was distributed. In real sense, the Relative Frequency Concept could not be applied since uninformed decisions could not just be tried. With the implementation of the most workable concept, some company practices had to be forgone such as absenteeism from work and other time wasting exercises.