Decision-making in business requires various tools and techniques including cost-benefit analysis. Decision-making is an integral part of modern management. Additionally, it is a primary function of the management and a key component in the role of a manager. The decisions that a manager makes determine the managerial and organizational activities. Moreover, the decision-making process is continuous and indispensable when running business activities. It occurs at every level of management to ensure the achievement of business or organizational goals. It creates core functional values that an organization adopts and implements to ensure optimum growth and drivability.
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THE TECHNIQUES OF DECISION-MAKING IN BUSINESS
A decision matrix helps to evaluate all options of a decision. It makes decision-making in business simpler by creating a table of all options and factors affecting the decision. Tallying the final score reveals the best option to meet the business or organizational goals. Similarly, a decision tree is a model that involves contemplating each option its outcome. Cost-benefit analysis is a technique that involves weighing the financial implications of each possible alternative to determine which decision makes more sense from an economic perspective.
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THE LIMITATIONS OF COST-BENEFIT ANALYSIS
The cost-benefit analysis estimates the value over some time. Consequently, this may cause serious miscalculations in the present value. Additionally, many benefits are difficult to quantify or measure. This increases the chances of inaccuracies due to the lack of a true value. Furthermore, at times cost-benefit analysis turns into a project budget leading to unrealistic business or organizational goals and errors. Moreover, the evaluations are usually subjective. Therefore, they are not absolute. The difficulty to quantify or estimate may lead to wrong evaluation. This negatively affects the decision-making in business. The project manager relies on data and information from previous projects. However, the facts are always changing in the present scenario.
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