Decisions_Exemplary_Professor001 ONLY

8045 Week 5: Examining decisions

Decision description

The decision described here is an actual decision I was responsible for as the head of operations for ABC Bank located in Kenya. The investment-banking arm of the bank decided to expand their operations regionally following their great success in the local market and immense pressure from regional clients to offer services in other markets. The options to expand were in the neighboring countries of Uganda, Tanzania, and Rwanda, which provided a ready market and had successful collaborations with Kenya in the past. The expansion plan was to enter the three countries within a period of five years and a research investigation provided the relevant decision information. Details of customer profiles, investment requirements, competitor analysis, cost breakdown, and expected net revenue values gave the leadership apex a glimpse into which market to enter first and the subsequent order of the launches. Alcantara and Mitsuhashi (2015) observed that the choice a company makes as to which market to invest in has ‘considerable influence on the rate of organizational growth and survivability’, and hence the seriousness of the decision (para. 1).

The research into customer profiles provided detailed information using probability theory as to the success of offering corporate and retail services in each market. In Uganda, both client groups had fair chances; in Rwanda, corporate services were the only option, while in Tanzania the retail option was insignificant to the corporate option, which had a higher chance of success, as displayed in Figure 1. Further, the managers had to decide if to open a branch (this was the only option for Uganda and Tanzania retail) or cooperate with an existing broker in an agency relationship (as seen with Rwanda and Tanzania corporate services). The expected payoffs, shown in Figure 1 on the extreme right, are a projection based on the financial models drawn post research.

Decision tree

The decision tree below is a schematic representation of the sequential decisions that will assist the decision makers to arrive at a rational decision by providing the best alternative that gives the bank the highest expected return (Stevenson, 2014; Hastie & Dawes, 2010).

U

g

a

n

d

a

Rwanda

T

a

n

z

a

n

i

a

C

o

r

p

o

r

a

t

e

(

.

6

5

)

R

e

t

a

i

l

(

.

3

5

)

Corporate

(1.0)

C

o

r

p

o

r

a

t

e

(

.

9

)

R

e

t

a

i

l

(

.

1

)

B

r

a

n

c

h

B

r

a

n

c

h

A

g

e

n

c

y

A

g

e

n

c

y

$17*

$4.5

$10

$15

$8.3

$4.5

$3

*Net present value in millions

Figure 1. Decision tree for a bank’s choice of which country to invest.

Reference

Alcantara, L. L., & Mitsuhashi, H. (2015). Too many to handle? Two types of multimarket contacts and entry decisions. Management Decision, 53(2), 354–374. doi:10.1108/md-03-2014-0125.

Hastie, R., & Dawes, R. M. (2010). Rational choice in an uncertain world (2nd ed.). Thousand Oaks, CA: Sage.

Stevenson, W. (2014). Operations management (12th ed.). New York, NY: McGraw-Hill/Irwin.