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Decision Making Process
Thus, the primary role of managerial economics is in evaluating the implications of the alternative courses of action and choosing the best or optimal course of action among several alternatives. As a result, the decision making process involves the following steps:
Step1: Establish the objectives - Identification of objective of the organisation is necessary to make a decision. Unless one knows what is to be achieved, there is no sensible way to make a decision.
Step 2: Define the problem - Specification of the problem is a crucial part of decision making. The problem may arise due to firm's planning process or may be prompted by new opportunities.
Step 3: Identification of alternatives - Once the problem is defined possible courses of action should be identified. After addressing the question, "What do we want?" it is natural- to ask "What are our options?" The decision maker should identify the variables under his control and the constraints that limit his choice.
Step 4: Selection of best alternative - Having identified the set of alternative possible solutions, revenues and costs associated with each course of action should be stated. Then the best possible alternative should be selected, given the goals of the firm.
Step 5: Implement the decision - Once an alternative is chosen, it must be implemented in order to be effective. Even organisations as disciplined as armies, find it difficult to carry out orders effectively.
Managerial Economies and Decision Making
Eicher has always tried to associate its models with superior technology, fuel efficiency, speed, reliability and, of course, better design. Because as group chairman and chief executive, Sandilya says, "It is important to capture the raw voice of the customer". Listening to the customer, however, is not everything. Listening just gives a broad idea of what the customer wants; the idea is to capture the voice and translate it into product design. This process has a technical name: Quality Function Deployment (QFD).
The process originated in Japan as a means of translating customer requirements into appropriate technical requirements throughout the development and production process of a product. Says Sandilya, "QFD tries to translate the WHAT of the customer to HOW to fulfil requirement Linking and documenting the processes make it an efficient system."
QFD is driven by the concept of quality and results in the best possible product to market. When appropriately applied, QFD has demonstrated a reduction of development time by one-half to one-third. This is possible because the first step in the process is to enable the company to define targets, for instance, in terms of product choice, power, fuel efficiency, coaching area, "Priority is the most important requirement. What is the consumer's priority and what price is he willing to pay for the features? This enables you to look at optimal product design," Sandilya says. The idea is to look at the pains in the current systems and what exciting features you could provide vis-a-vis design. This step is handled by the House of Quality.
The House of Quality is the most commonly used matrix in QFD. It includes the following components: an Objective Statement, the Voice of the Customer; Importance Ratings, a Customer Competitive Assessment, the Voice of the Supplier, Target Goals, a Correlation Matrix, a Technical Assessment, Probability Factors, a Relationship Matrix, Absolute Score, and Relative Score. At Eicher, these steps ore divided into House of Quality phase 1, 2 and 3.
Each part of the vehicle needs special attention from cabin interiors to the engineering of the vehicle. For instance, for a driver of Indian built, it is difficult to get inside the vehicle, so steps were built into the vehicle and handles made easily reachable.
"Customers have started paying a lot of attention to driver comfort. For our poultry segment, chickens are transported over 8-10 hours at night, as it is cooler and healthier for the chicken. Because of high mortality of chicken, owners want the driver to be comfortable so that he does not stop on the way. Ultimately, it is high productivity that everyone is looking at," says Sandilya.
For school buses, Eicher paid lot of attention to safety features after speaking to teachers and parents. School buses were designed with separate racks for water bottles and bags, grab roils were made easily reachable, the seat top handles were padded and the front seats were turned inside.
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