Amanzi Tea РDecision Analysis For Opening A New Caf̩ In Central London

The Importance of Decision Making and Decision Analysis

1). Decision Making: Importance

Decision making is an integral part of everyone’s life as all humans make decisions every now and then, managers and executives who make billion decisions each year, decision making for them is the bread and butter. Organizational decision making involves the requirement of accurate information and ability to create sense from information, failing in any of these two attributes proves to be fatal for the decision makers in the organization (Jones, George, Barrett and Honig, 2016). Decision making plays a vital role in management and planning process and an important component of managerial activities, its importance is discussed below:

• Decision making is important for better utilization of resources as it helps in achieving objectives of the organization. Resources are the six Ms which are men, money, materials, machines, methods and markets. Correct decisions related with these will result in better and optimum utilization of the resources (Nelson, 2017).
• It is important for facing problems and challenges, when correct decisions are taken by the managerial level it helps in the providing optimum solutions which enhances the ability to face new challenges and grasp hidden opportunities (Walter, Kellermanns and Lechner, 2010).
• It is important for the growth of the business or organization as correct decisions helps in stability of all the resources which caters in achieving business growth at a faster pace (Tohidi and Jabbari, 2012).
• It is important for the employee retention, as employees decisions related with staying or leaving the job or the organization depends upon the effective leadership which is reflected through correct decision making from the managers of the organization (Nelson, 2017).
• It is important for the customer satisfaction as a managerial decision affect employee’s job satisfaction and this affect the services which are provided to the customers by the employees, happy employee will result in better customer satisfaction and unhappy employee will result in decreased customer satisfaction (Walter, Kellermanns and Lechner, 2010).
• It is important for the reputation of the company; as the managerial decisions affect the entire company and its well-being, good decisions will keep up the good reputation of the company and bad decisions can tear down the company within a blink of an eye (Tohidi and Jabbari, 2012).
• It is important for job security of the mangers, as they are mostly the decision makers. Good decision leads to better job security and bad decisions for long span can impact their job and livelihood (Larson, 2017).

Decision Analysis: Application

Decision analysis is a balanced approach while making decisions for problems with higher uncertainty, risk rises with these uncertain problems as lack of assurance is there what is going to happen and possibility of significant loss increases. Formal models are developed which represents problem related with decision, assist logical analysis, and recommend appropriate course of action. Decision analysis models are authoritative i.e. they generate tailor made strategies for a particular decision involving numerous contingencies, these models can be used by individuals or groups involving into decision making related to risk management, investments, and strategic business decisions. Decision analysis processes are aided by sophisticated computer models, graphical representations for evaluating alternative solutions, and decision trees are made for signifying challenges and opportunities (Howard and Abbas, 2015).

At all levels in organizations, increasing competitions are imposing need for effective decision making as in today’s time rule of thumb, intuitions, and financial analysis have become obsolete in bringing out appropriate results which can facilitate effective decision making. Decision analysis is used by businesses, government, and in some common domains also. In businesses if we see the decisions can be applied for better customer service by taking decisions in their welfare or indirectly through the employees, manufacturing businesses can apply decision analysis in for increasing their productivity or efficiency or quality assurance or combination of these, in project selection decision analysis can provide best results in any field or industry, and new product development decisions or new venture launching decisions (Linkov and Moberg, 2011).

Decision analysis application in government sector can be in terms taking decisions regarding emergency management as what consequences can occur and what probable solutions can be there for the problem, decisions related with opting the right and new energy sources as government can determine by evaluating each source under needed attributes, and environmental risk management can be catered by taking decisions on the basis of analysis which can reduce the maximum risk and provide with alternatives to deal with minimum risks (Tosteson, 2014). Lastly, decision analysis can be applied commonly in terms of medical treatment and diagnose as it will help in reducing risk related to clinical treatments, and it can be used in bidding and negotiation as the outcomes of the bidding can be judged and procurement can be done smoothly (Wu and Kersten, 2017). Though there are many more applications of the decision analysis, above mentioned are the major ones.

Decision Analysis Applications

Amanzi Tea

David Elghanayan owns the company, he opened the first café named “Amanzi Tea” in Marylebone in 2013, Amanzi means water and it depicts as the source of life and also the most essential ingredient for making a perfect cup of tea. The company has grown from a teacart to expanding its business in retail, wholesale, and web. Company aims at providing tea differently by changing the traditional perception about it by exploring possibilities through constantly creating innovative processes using oldest ingredients which results in unique blends that are not found anywhere else (Amanzi Tea, 2018).

Quality of the café is reflected by the purity in the tea which is served by them, it all because of the innovative processes of the café and passion that people have who are working there. The goal of Amanzi Tea is to motivate people towards tasting new varieties of tea so that they can have their favourite blend for whichever occasion they want as the café serves over one hundred varieties of premium loose leafs which are brought from around the globe, and it is also promised that customers are given the newest, freshest and innovative blends of your own choice according to the desires (Ellis, Coulton and Mauger, 2015).

2). Decision Problem Identified

It is planned by Amanzi Tea to set-up another café by the month of August at Shoho area of Central London on the Brewer Street for serving a new customer base. In this regard the decision problem which occurs in front of the Amanzi Tea is of choosing the appropriate location for the café in the desired area of London and the nature of this decision is a non-programmed opportunity seeking one as the company plans to conquer new market for expansion (Eversham, 2018). The multiple objectives which this decision problem involves are stated below:

• First objective is to win over the alternative of tea café i.e. coffee café by winning the customers in the area of operations.
• Second objective is to generate sustainable profits from the initial months.
• Third objective is to maintain the existing quality and reputation of the Amanzi Tea.

The identified decision problems and the multiple objectives regarding the problem of setting-up the new café of Amanzi Tea is a common business decision making problem as it involves lots of effort in judging all the relevant attributes to achieve the multiple objectives by using the decision analysis tool to apply the best choice which proves to give best results and fruitful outputs to the organization.

3). SMART: Simple Multi-attribute Rating Technique

SMART is a simple way which to implement Multi-attribute Utility Theory (MAUT), the decisions which depends upon the values and the probabilities are the ones in which errors can occur at the time of modelling or at the time input. Modelling errors occur because simplified assumptions are applied to models and on the other hand input errors occurs when there is no accurate reflection of the subject preference in terms of the measures which are obtained. Each alternative which is depicted considers some criterions which have value and every criteria consists some weightage which signifies the importance of criteria over the other criteria (Risawandi and Rahim, 2016).

The Decision Problem of Amanzi Tea

Applying SMART

A ten step method is used to apply SMART in decision making analysis, and below are the steps with appropriate application to the identified decision problem of the Amanzi Tea:

• First step is to identify the decision maker i.e. the individual or the group who will take the decision relating to the identified problem (Patel, Vashi and Bhatt, 2017). Now for the Amanzi Tea; the decision maker is the owner David Elghanayan as the company started operations in London from 2013, which is hardly a long duration to have involvement of multiple decision makers.
• Second step is to identify the issue i.e. issues regarding the actual problem identified for which the decisions had to be taken (Martin, 2010). At Amanzi Tea issues are related with premises are rent or lease cost, waste management, pest control, and building insurance as all these involve costs. Other issues which can be faced are of maintaining appropriate inventory, and giving tough fight to the coffee shops residing in the area.
• Third step is to identify the alternatives i.e. in this step outcomes are to be identified related to possible actions; it is a data gathering process (Patel, Vashi and Bhatt, 2017). In terms of the Amanzi Tea Café there is not much data to be collected but majorly regarding the premises rent or lease amount in the Soho, Brewer Street. Also data regarding average footfall in the area can help in structuring alternatives and the options.

	Rent/ Lease Cost	Area of the Premises (Square Feet)	Average footfall at Brewer Street (Per day)	Competitors nearby premises	Degree of risk on behalf of other attributes
Premises 1	£136500	1500 sq. ft.	1300	2	Moderate
Premises 2	£109200	1200 sq. ft.	1200	3	High
Premises 3	£72200	800 sq. ft.	900	5	High
Premises 4	£91000	1000 sq. ft.	1000	2	Moderate
Premises 5	£118300	1300 sq. ft.	1500	0	Low

The above table signifies 5 different alternatives on the basis of 5 different attributes which includes rent or lease costs of the premises, then area of the premises, footfall nearby the premises, competitors residing nearby the premises (Coffee Café’s), and lastly the degree of risk of the alternatives on behalf of other attributes. Calculation of cost premises is as follows:

Rent cost at Soho, Brewer Street is £91 per square feet per annum; hence if the area of the premises is 1500 sq. ft. then the cost will be calculated 1500 sq. ft. * £91 = £136500. Like this rent of other premises have also been created.

• Fourth step is to identify dimensions which are relevant with the value for evaluating alternatives i.e. if there too many objectives or goals that have been identified then combining the less important objectives with the most important objectives (Martin, 2010). This is done to improve the decision making, in the context of the Amanzi Tea; it is not necessary to combine objectives as there are not in too many numbers but a decision tree can be made on the basis of identified objectives.

                                                                 

• Fifth step in the process is to rank the dimensions according to their importance i.e. to be précised which attributes are considered most on which the decision depends, if the individual has to rank then it is easy but not with the big organizations as more people are involved and everyone carries their own opinion with justification (Patel, Vashi and Bhatt, 2017). As for Amanzi Tea, David can rank the attributes according to his free will that are Profits > Winning Customers > Maintaining Standard
• Sixth step is to rate dimensions in importance, preserving ratios i.e. the least important dimension is assigned importance of 10 and simultaneously next least important dimension comes by, the process is effective when objectives are in less number (Martin, 2010). For Amanzi Tea there is one individual who is making the decision and this process will be less complicated for David.

Attributes	Assigned Importance
Rent/ Lease Cost	100
Average footfall at Brewer Street (Per day)	80
Area of the Premises	60
Competitors nearby premises	40
Degree of risk on behalf of other attributes	20

In this the Rent/Lease cost is assigned highest importance because it involves higher cash outflow which is to be covered through profits, then footfall is taken after that because more crowd will create chances of attracting more customers, after that area of the premises is given importance because seating capacity matters, second last are the competitors because they are mostly coffee café’s and lastly risk because it is on behalf of other attributes.

• Seventh step is to sum all the weightage and divide each of them with the total sum i.e. allowing normalization of relative importance by summing weights into 1 (Patel, Vashi and Bhatt, 2017). For Amanzi Tea weighting the total sums of above stated alternatives will be done.

Attributes	Original Weight	Normalize Weight
Rent/ Lease Cost	100	33.33%
Average footfall at Brewer Street (Per day)	80	26.66%
Area of the Premises	60	20%
Competitors nearby premises	40	13.33%
Degree of risk on behalf of other attributes	20	6.66%
Total Sum	300	100%

Calculation of normalized weigh is in the following manner:

Normalized Weight = (Original Weight * 100) / Sum of original weight
Like this weight for the Rent/Lease Cost = 100*100 / 300

• Eighth step in the process is to measure the location of every alternative evaluated on the basis of dimensions i.e. measuring is done by classifying into groups, partly, and purely objective (Martin, 2010). At the Amanzi Tea the measuring will be done on the basis of purely objective.
• Ninth step is to calculate the utilities i.e. each premises will be measured through calculating the aggregate benefit from each of the premises(Patel, Vashi and Bhatt, 2017). This formula can be put into the outcomes from the step seventh of Amanzi Tea.

Attributes	Premises 1	Premises 2	Premises 3	Premises 4	Premises 5	Weights
Rent/ Lease Cost	25	65	100	80	40	33.33%
Average footfall at Brewer Street (Per day)	85	75	20	25	100	26.66%
Area of the Premises	100	75	20	30	85	20%
Competitors nearby premises	80	60	20	80	100	13.33%
Degree of risk on behalf of other attributes	80	20	20	80	100	6.66%
Aggregate benefits	61.98	60.12	46.66	55.32	96.98

Aggregate benefits are calculated in the following manner:
Aggregate benefits = (Attribute Weight * Value Assigned) / 100
Aggregate benefit of Premises 1 = [25*13.33] + [85*26.66] + [100*20] + [80*13.33] + [80*6.66] / 100 = 61.98. In the above table marks are given hypothetically.

                                                                 

• Tenth step and the final one is to decide i.e. to choose among the alternatives in regards to the utility and benefit constraint, if one alternative is to be selected then it is very easy to choose the one which is having highest utility among all (Martin, 2010). The Amanzi Tea will choose Premises 5 from the shortlisted five, as it is having the highest aggregate benefit.

Sensitivity Analysis

It is basically a technique which is used to determine impact of the independent variables on the dependent variable by the means of provided set of assumptions is known as sensitive analysis. The technique is used within specified boundaries depending on the number of input of variables, for instance when the interest rates (independent variable) changes it has effect on the prices of bond (dependent variable). Sensitivity Analysis is to be known by also one other name which is “What – if – analysis” and an exclusive feature of this technique is its use which can be applied for any activity or system, like planning a family vacation involving different variables or a major corporate decision at any level of the organization (Zhao, Wei and Xu, 2013).

Applying SMART

If the application of sensitivity analysis is seen upon the Amanzi Tea decision problem then it can be used for identifying and collecting appropriate data for future analysis, it can be used for optimization of resources and assets, and it can be used to choose reasonable advertising method when the premises is finalized for the operation of the new café. Another application of this technique can be used at Amanzi Tea for examining the effect on the net sales when the assumed sales levels are increased or decreased then sensitivity analysis (Borgonovo, 2017). For example:

• “WHAT” will be forecasted net income, “IF” sales forecast is 20% “HIGHER”?
• “WHAT” will be forecasted net income, “IF” sales forecast is 10% “LOWER”?

These also signifies why the sensitivity analysis is also known as the what – if – analysis.

Influences of Change in Identified Attributes 

In multi-attribute decision making process there comes many occasions when the attributes are pen down are changed during the decision making process when it moves on and before coming onto the actual decision, these changes causes the decision makers to change the evaluation criterions for the alternatives as it might not suit with the earlier decided criteria. The major influence of the changes in the attributes is that it increases the time of making the decision and creates loss indirectly to the organization as the delays in decision are not a good sign, although these attributes are also vital and if the need is there to have better decision than the time has to be compromised (Ozcan and Sheinin, 2015). Overall good practice is that attributes selected must be wisely chosen which covers all the needs which are affecting directly or indirectly with the decision that has to be made by the organization, when this practice is adhered it also caters to evaluate results more accurately when the alternatives are run through decision making models and analysis (Hahn, Seaman and Bikel, 2012).

4). Strengths and Limitations

It is very wisely said that everything has its pros and cons or every coin has two sides, yet it is true because nothing can be perfect. The decision making analysis which is done for the Amanzi Tea also had some strengths and some weaknesses which are stated below:

• Starting with the strengths first is that the applied method helps in converting important weight into the actual numbers, secondly; the use is simple and technique can be applied to any kind of assigned weight. Thirdly; it decreases the efforts from the decision makers and handling of data is very fluent under each of the criterion (Tzeng and Huang, 2011).
• The analysis was not having much of the disadvantage but only of having a complicated framework and a very long procedure which determines inconvenience in the overall work. Also the segregated objectives are to be merged which can affect the results in future and also the complicated calculation and making groups of the alternatives creates discomfort to the decision makers (Marsh, Goetghebeur, Thokala and Baltussen, 2017).

Conclusion:

The report concludes about how decision making in organizations are done by taking the help of an analytical tool in and how actual situation works while assessing its strengths and the limitations of the analysis which has been done. The importance of the decision making is discussed that how so many factors are influenced directly and indirectly with a single decision which is taken by the organizations and the factors have fatal impacts if the decision is wrong as all the factors are part of the system and the organization. Application of the decision analysis is discussed as how decisions are taken by applying the proper analysis to the attributes and factors involved.

Further in the report a tea café of London is chosen in which a decision problem is identified which is having multiple objectives that are to be achieved, the café name is Amanzi Tea and it plans to set-up a new outlet in a particular desired area of London to capture new market and customers. Later on when the decision problem is identified a Simple Multi-attribute Rating Technique is applied to the decision problem of Amanzi Tea for getting the appropriate solution regarding the problem of location for setting up the new outlet and the results determines that the Amanzi Tea should chose Premise 5 among others at it ranks highest in terms of benefits.

After this the sensitivity analysis is emphasized upon by describing its meaning and by quoting appropriate example to clear the concept, also taking the decision problem of Amanzi Tea which was analysed by the SMART process is taken into account and a glimpse is given that how sensitivity analysis would have been used to the same problem for increasing the effectiveness of the decision that have to be taken with regards to the location. Further, report concludes about the influences that are faced by the organization during the time of decision making process when the attributes related to the decision problem are changed in between the process due to any reason. Lastly the report concludes about discussing the strengths and the limitations of the analysis which has been done on the decision process of Amanzi Tea has been discussed in detail.

In modern management of business decision making is an integral part, making a sound decision have become a primary function. Managers are taking more than hundreds of decision as decision making in the role of the manager is a key component nowadays, decisions are playing important role in organizational activities as well as managerial activities. A decision is a course of action for achieving organizational or managerial objectives or goals chosen from a set of alternatives, they are made at every level to ensure business goals are achieved. (Caramela, 2017).

Running a business requires excellent ability to make best decisions as one wrong choice or a decision can have adverse effect on the entire company, business owners must realize the weightage involved with a decision which is being made is very crucial. In decision making basic principles are similar but the tools used and the techniques applied are in dozens like the graphs, models, charts, and combinations are also used to reach at a final decision. Increasing results or performance is done through analytical tools that analyze data and helps in extracting relevant information, but also it is important to choose relevant tool as in today’s time there are numerous tools available for different purposes and businesses or organizations must know for themselves which one to use and when (Marr, 2016).

Decision analysis is referred as the systematic, quantitative, and interactive approach used by the private as well as public sector organizations in addressing and assessing crucial choices which are faced, and this term was given by Ronal Howard in 1964. Theories from various fields like psychology, management science, and economics are drawn together as decision analysis is an interdisciplinary of all these fields, it utilizes varied tools which includes models for decision making on the basis of conditions demand or fulfilling multiple objectives like risk analysis, risk assessment, study of decision making behaviour of consumers, analysis of competitive and strategic decision, and modelling expert system for decision support (Lexicon, 2018). Business analytics tools are software to retrieve data from business systems and combine in repository for review and analysis (Volitich and Ruppert, 2012).

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