This week, I had an exciting time learning the essential factors that can be used in understanding and solving business problems. There are diverse types of business problems and to effectively unravel these challenges, it is necessary to know the key parameters to evaluate in analysing the best set of decisions that will address the issues. Effectively analysing the cause of business problems will lead to knowing the best alternatives and decisions that will ensure that business performance is enhanced eventually thereby maximising value for the shareholders. I learnt about the two categories of factors that can be used to strategically analyse the best line of decisions that will improve business operations and they are the qualitative and the quantitative factors.
Qualitative factors are those parameters that cannot be quantified or measured mathematically or numerically but have a major influence on the outcome of business decisions. For example, when a company tries to launch a new product into the market and key decisions are to be made, it is good to analyse the qualitative factors in such a situation. Such qualitative factors in this instance will include the potential demand for the product, the best branding options for the product, the readiness of the product, and the potential values that the product will offer to users. These and more will be considered when making a business decision.
Another essential lesson for me from this week’s lectures is the ability to use quantitative factors to make reasonable projections for a business decision. Quantitative factors, unlike the qualitative parameters, are measurable and they complement the qualitative aspects in assessing business decisions such as to launch a new product or not. The quantitative factors help business managers to quantify the effects of a decision on the business. That is, to what extent will the choice made affect the financial performance of the business. I found out that quantitative factors can include revenue, gross profit, costs, non-financial data like market share.
From my studies I came to understand the essence of quantitative factors in analysing business decisions. Business managers can depend on the financial projections to decide the best line of action to take on a new product or market offering. For example, if a company intends to launch a new product, the financial projection can be used to identify the profitability potential of the product. Quantitative factors are also considered when business managers want to decide whether to buy a machine or a piece of equipment and how it will improve the output or productivity of the company. Assuming the new machinery uses less expensive raw materials or decreases labour hours, the company will end up making more profit from the purchase of a new piece of equipment as the cost of excess raw materials is saved and less labour is used in operating the machine.
In conclusion, effective business decisions that will improve the overall business performance can be achieved by applying all the necessary qualitative and quantitative factors that are considered mutually exclusive and collectively exhaustive.