Business Decision Simulation Assessment

Business Decision Simulation
Assessment

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Part 1: Business Decision Simulation..............................................................................................3
Summary of the problem.............................................................................................................3
Decision making tools.................................................................................................................3
Expected Monetary Value...........................................................................................................3
Sensitivity Analysis.....................................................................................................................4
Introduction..................................................................................................................................5
Scenario 1: Base case...................................................................................................................6
Scenario 2: Reducing Variable Cost............................................................................................6
Scenario 3: Reducing Fixed Costs...............................................................................................7
Scenario 4: Your Strategy............................................................................................................7
Sensitivity Summary....................................................................................................................8
Evaluation: Problem Solving Process..........................................................................................8
Part 2................................................................................................................................................9
Introduction..................................................................................................................................9
Decision making within an ethical context..................................................................................9
Big data within a cultural context..............................................................................................11
Research Gap.............................................................................................................................12
Conclusion.................................................................................................................................12
REFERENCES................................................................................................................................1

INTRODUCTION
Business decision refers to the decision taken by the management of the company for
determining the short and long term activities of the company in order to meet its objectives.
There are various risks that the business might face as a result of the uncertainties existing in the
business environment. The report will analyse the issue that is faced by the ABC company. The
company faces the issue of deciding the fixed and variable cost that will yield maximum returns
for the company under its limitation to produce and sale limited number of units.
MAIN BODY
Part 1: Business Decision Simulation
Summary of the problem
The problem that the ABC company is facing currently is that the sales unit of the
company in all three of the market situations that are good, average and bad are fixed. The
company will be able to sell 1500 units is the market conditions will be good. In case the market
conditions will be average the company expects to sell 1200 number of units. And in the case of
bad market conditions the company will be able to sell 800 units only as per the expected trend
(Huang, Silitonga and Wu, 2022). The issue that the company facing is to decide the variable
cost and the fixed cost that will when incurred be able to make fair returns for the company.
Decision making tools
The decision making tools used in the report for solving the issue that ABC company is
facing are expected monetary value and sensitivity analysis. The reason for selecting the
expected monetary value tool is that it quantifies the risk. Expressing the risk in the quantitative
format and then performing analysis of the risk accordingly helps in undertaking the most
optimum decision. Further sensitivity analysis helps decision makers to make full use of the all
the content available (Gatti, Ulrich and Seele, 2019). The benefits and drawbacks of the situation
along with the limitations attached and scope of the decision can be taken into consideration.
Using the particular method, the predicted outcomes of the decisions can be compared with the
base outcome from the key prediction.
Expected Monetary Value
Expected monetary value is a part of risk management. It is used for performing the
analysis for risk by expressing it in quantitative terms. The technique includes mathematical
computations. The method is basically based on using only one formula. The calculation of EMV

involves probability. The chances of occurring of an event is known as the probability of the
particular event. EMV calculation hence helps in finding out the average of all the possible
future outcomes. The formula for Expected Monetary Value is equals to probability of the
occurrence of a particular event multiplied with the monetary impact of that particular event
(Ahmed and Alsisi, 2022). The expected monetary value is computed for every risk either
positive or negative. After the EMV is calculated the estimated costs of the work are added for
the generation of the cost baseline. This give the value for contingency reserve. The sum total of
EMVs that are calculated helps to reach the contingency reserve, all the values gets add up.
The expected monetary value assists the planners of the projects to know the amount of
contingency reserve for managing the costs and associated risks. As the monetary value of each
alternative is known the it helps the decision makers to decide one alternate. It is the cost
effective way in which with the use of past data risks are evaluated. It gives average outcome of
all risks that are identified.
The method is recommended for large projects only and hence should not be used for
small projects as the accuracy rates are low in such cases. The major determinants, impact and
probability are depended on the opinions of the experts and historic data. So it can be biased
based on the subjectivity of the determinants (Mariotto and et.al., 2020). Both the positive and
negative risks are to be identified for the computation of accurate EMV. The positive risks are
the opportunities for the company and negative risks are the threats to the company.
Sensitivity Analysis
Through sensitivity analysis the effect of change in the independent value over the
dependent variable is determined. It is the study of contribution of different uncertain risk
sources in mathematical model in the overall uncertainty (A Ashley and F Parmeter, 2020). It is
popularly also known as what if analysis among the economists and financial analysts. The
analysis is used by businesses.
It is a financial model for determining the affect in targeted variables that comes with the
change in other variables referred to as input variables. Sensitivity analysis is also known as
What-If analysis. The analysis helps in making prediction about share prices of public
companies. Investors find the sensitivity analysis to determine the effect different variable have
on investment returns (Pang and et.al 2020). This analysis is useful in study of “black box
process” where the output is an opaque function of several inputs. The user who conducts the