CISB594 – Business Intelligence Changes in Business Environment and Managerial Decision Making

CISB594 – Business IntelligenceCISB594 – Business Intelligence

Changes in Business Environment and Changes in Business Environment and Managerial Decision MakingManagerial Decision Making

ReferencesReferences• Materials used in this presentation are extracted mainly from

the following texts, unless stated otherwise.

ObjectivesObjectives

At the end of this lecture, you should be able to:• Critically discuss problems faced by today’s business and ways Critically discuss problems faced by today’s business and ways

they are being addressedthey are being addressed• Discuss the need for computerized support of managerial Discuss the need for computerized support of managerial

decision makingdecision making


Changing Business EnvironmentChanging Business Environment


• The environment in which organizations operate today is The environment in which organizations operate today is becoming more and more complexbecoming more and more complex

• Tough time for business, too many factors to be taken into Tough time for business, too many factors to be taken into account, more competitions, more pressures, more account, more competitions, more pressures, more management problemmanagement problem

• The complexity creates The complexity creates opportunitiesopportunities on one hand and on one hand and problemsproblems on the other. on the other.

Changing Business EnvironmentChanging Business Environment


• Factors that change Business environment factors can be Factors that change Business environment factors can be divided into divided into fourfour major categories: major categories:– markets, markets, – consumer demands, consumer demands, – technology,technology,– societalsocietal

• The intensity of these factors increases with timeThe intensity of these factors increases with time

Business Environment FactorsBusiness Environment FactorsFACTORFACTOR DESCRIPTIONDESCRIPTIONMarketsMarkets Strong competition, expanding global marketsStrong competition, expanding global markets

Blooming electronic markets on the InternetBlooming electronic markets on the InternetInnovative marketing methodsInnovative marketing methodsOpportunities for outsourcing with IT supportOpportunities for outsourcing with IT support

Need for real-time, on-demand transactionsNeed for real-time, on-demand transactionsConsumerConsumer Desire for customizationDesire for customization demanddemand Desire for quality, diversity of products, and speed of deliveryDesire for quality, diversity of products, and speed of delivery Customers getting powerful and less loyalCustomers getting powerful and less loyal TechnologyTechnology More innovations, new products, and new servicesMore innovations, new products, and new services

Increasing obsolescence rateIncreasing obsolescence rateIncreasing information overloadIncreasing information overload

Social networking, Web 2.0 and beyondSocial networking, Web 2.0 and beyondSocietalSocietal Growing government regulations and deregulationGrowing government regulations and deregulation

Workforce more diversified, older, and composed of more womenWorkforce more diversified, older, and composed of more womenPrime concerns of homeland security and terrorist attacksPrime concerns of homeland security and terrorist attacks

Increasing social responsibility of companiesIncreasing social responsibility of companiesGreater emphasis on sustainabilityGreater emphasis on sustainability


Organizational Responses – managerial Organizational Responses – managerial approachapproach

• In handling the complexity of today’s business environment, In handling the complexity of today’s business environment, managers are expected to respond quickly and be agilemanagers are expected to respond quickly and be agile

• Be Reactive, Anticipative, Adaptive, and ProactiveBe Reactive, Anticipative, Adaptive, and Proactive• Managers may take actions, such asManagers may take actions, such as– Employ strategic planningEmploy strategic planning– Restructure business processesRestructure business processes– Participate in business alliances/Improve partnership Participate in business alliances/Improve partnership

relationshipsrelationships– Improve corporate information systemsImprove corporate information systems– Encourage innovation and creativity … and many moreEncourage innovation and creativity … and many more

• Need to call for many-many Need to call for many-many informed decisionsinformed decisions


Decision Making in BusinessDecision Making in Business• Management Management Decision Making Decision Making• Decision making means selecting Decision making means selecting the best solution the best solution from two or from two or

more alternativesmore alternatives• Management Management waswas considered an art because a variety of considered an art because a variety of

individual styles could be used in addressing problemsindividual styles could be used in addressing problems• Often based on creativity, judgment, intuition, experience Often based on creativity, judgment, intuition, experience

rather than on a scientific approach.rather than on a scientific approach.– Studies suggest that managers roles can be classified into 3 major Studies suggest that managers roles can be classified into 3 major

categories:categories:• Interpersonal – figurehead, leaderInterpersonal – figurehead, leader• Informational- spokesperson, disseminatorInformational- spokesperson, disseminator• Decisional- negotiator, resource allocatorDecisional- negotiator, resource allocator


Decision Making in BusinessDecision Making in Business

• Making decision has become a complex tasks in management, Making decision has become a complex tasks in management, due to the rapidly changing business environments : due to the rapidly changing business environments :– IT has resulted in more and more alternatives to choose IT has resulted in more and more alternatives to choose

fromfrom– Government regulation, political climate makes it difficult Government regulation, political climate makes it difficult

to predict resultsto predict results• Need to make fast decisions, insufficient time to weigh Need to make fast decisions, insufficient time to weigh

decisions, errors may cost the business negativelydecisions, errors may cost the business negatively• Intuition and trial-and-error approaches to managerial Intuition and trial-and-error approaches to managerial

decision making may not be as effective and applicable in decision making may not be as effective and applicable in today’s business environmenttoday’s business environment


And we know this…And we know this…

• Today’s computerized systems offer capabilities to facilitate Today’s computerized systems offer capabilities to facilitate decision support through:decision support through:– Speedy computationsSpeedy computations– Improved communication and collaborationImproved communication and collaboration– Increased productivity of group members (automated Increased productivity of group members (automated

processes)processes)– Improved data management (easy retrieval of data)Improved data management (easy retrieval of data)– Quality supportQuality support– UbiquityUbiquity


• Decision-making processes depends on the degree of Decision-making processes depends on the degree of structurednessstructuredness

• Structured processes are routine and typically repetitive Structured processes are routine and typically repetitive problems – standard solution exists. problems – standard solution exists. E.g. E.g. rule based solutionrule based solution, , if only 70% on the seats on a flight from LA to NY are sold if only 70% on the seats on a flight from LA to NY are sold three days prior to departure , offer a discount of x % to non-three days prior to departure , offer a discount of x % to non-business travelers.business travelers.

• Unstructured processes are complex, no fixed solution – Unstructured processes are complex, no fixed solution – necessary to develop customized solutions. Such solutions necessary to develop customized solutions. Such solutions will require intuition, judgment, communication and will require intuition, judgment, communication and collaboration in manpower and technologies collaboration in manpower and technologies E.g. How to E.g. How to decide on advertising and promotionsdecide on advertising and promotions

Structured Decision and Structured Decision and Unstructured DecisionUnstructured Decision


Decision Making in BusinessDecision Making in Business

How/Where can he obtain the answers for those questions?How/Where can he obtain the answers for those questions?


Common Business QuestionsCommon Business QuestionsIn Telecommunication business– Which customer groups are highly profitable, and

which are not?– To which customers should we advertise which

kind of special offers?– What kind of call rates would increase profits

without losing good customers?– How do customer profiles change over time? E.g

from a student to an employee


Common Business QuestionsCommon Business QuestionsIn Health Business– Personal health records (at GPs, specialists, etc.) – how

many obesity case, common health problems– Hospital data (e.g. admission data, midwives data, surgery

data) – number of registered nurse, doctors– Are people committing fraud? – MCs, medical report– Correlations between social and environmental issues and

people's health?


Common Business QuestionsCommon Business QuestionsIn Finance– Credit card transactions – most visited websites

for online purchase, when, how much– Loan applications – types of loans– Retail financing deals – willingness to take up loan

among customers– Is a customer likely to repay their loans? –

patterns based on age, salary, gender– Will a customer respond to special offers?


Common Business QuestionsCommon Business QuestionsIn Retail– What items are you likely to buy in the future?

• In particular what combinations are you likely to buy• How can we re-arrange our store to make you impulse buy –

coke and nappies!

– What kind of special offers would you most likely respond to?

– Which other customers are you most closely related to?– What kind of ads can we display to you while you

browse?


ExerciseExercise

• Think of a fast food and beverage business• Assume you are part of the management/ decision

makers (Identify at least 2 roles)• Identify a list of business questions you may have in

performing your duties• Discuss how the answers to these questions can help

to make the business perform better• Prepare a presentation to summarize your discussion

Question for youQuestion for you

1. Discuss 3 reasons why making business decisions today has become a complex task

2. Today’s computerized systems offer capabilities to facilitate decision support through ubiquity. Explain this notion.

Now ask if ..Now ask if ..

You are able to:• Critically discuss problems faced by today’s business and ways Critically discuss problems faced by today’s business and ways

they are being addressedthey are being addressed• Discuss the need for computerized support of managerial Discuss the need for computerized support of managerial

decision makingdecision making


Documents

CISB594 – Business Intelligence Changes in Business Environment and Managerial Decision Making