Decision Support for Management

Decision Support for
Management

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
System Dynamics...................................................................................................................1
System Dynamics Diagram....................................................................................................2
TASK 2............................................................................................................................................2
Identification of decision variables........................................................................................2
Formulating the objective function........................................................................................3
Formulation of set of constraints............................................................................................3
Formulation of set of assumptions.........................................................................................3
TASK 3............................................................................................................................................3
Constructing the simple analytical model..............................................................................3
TASK 4............................................................................................................................................6
Analysing as well as solving the simple analytical model.....................................................6
TASK 5............................................................................................................................................7
Critical evaluation of the simple analytical model.................................................................7
TASK 6............................................................................................................................................7
Revised analytical model........................................................................................................7
TASK 7..........................................................................................................................................11
Critical evaluation of the revised simple analytical model..................................................11
TASK 8..........................................................................................................................................11
Construction of the simulation model..................................................................................11
TASK 9..........................................................................................................................................14
Critically evaluation of the simulation model......................................................................14
TASK 10........................................................................................................................................14
CONCLUSION....................................................................................................................14
REFERENCES..............................................................................................................................16

INTRODUCTION
In a company, number of problems and situations arise which hamper its smooth
functioning. In the present study, Tesco is to be chosen which is operating in the retail industry
of UK. The scenario taken for the report is that “in the UK growth rate of economy declines due
to arising situation of recession which effects on the profitability of Tesco firm.” In the current
report case of Tesco is taken in to account under which its problem of earning low profit is taken
in to account. Due to reduction in prices profitability of firm decline. In order to combat with this
problem simulation and analytical model is developed and solution of problem is identified. To
combat the recession, Tesco purchases raw materials in bulk from multiple suppliers which helps
to reduce the cost and price of various products. On the basis of previous costing, simple
analytical model is prepared and with the help of revised costing, simulation model is to be used
for the organisation. The present study provides construction of these two models along with
description and analysis. Along with this, in the current study, application and discussion about
the system dynamics method and modelling are also provided.
TASK 1
System Dynamics
In a firm, there are different kinds of problems arise which affect it in adverse situations
and because of this, level of profitability gets negatively impacted (Hsu, 2012). In order to
overcome the problem of data and evaluate it in an appropriate manner along with deriving
solution, simple dynamics model is used and applied. Hence, in the current case, for resolving
negative impacts of recession on the Tesco, simple dynamics model like simple analytical and
simulation are used.
In the current case study, problem is regarding to the impact of recession on the price of
products and profit level of the Tesco and in this regard model is developed. Key concepts of the
chosen problems are like recession in market, price of products and services as well as
profitability of an entity (Xu and Coors, 2012). Along with this it has been assessed what change
come in the firm profitability if economies of scale is generated in the business.
When the System Dynamics Modelling is used within Tesco, main aspect of this is to
analyse the problem as well as its impact on business in a positive or negative manner. Along
with this, it provides proper instructions and guidance to the manager in terms of deriving
solution (Hinder and et.al., 2013).
1

System Dynamics Diagram
In the current case, through system dynamics diagram and method, it has been identified
that at the time of recession, if company and manager includes shipping cost while deriving
prices of products then, it will be able to deal with the situation of recession (Loyo and et.al.,
2013).
TASK 2
Identification of decision variables
To make and derive decisions of any kind of business problem, there are specific
variables that are to be considered and on the basis of that, solution will be taken in an effectual
manner. In the present study, different number of variables which are taken into account are like
recession, risk, cost of suppliers, profit, shipping cost, price of goods and services as well as
quantity of order (Parmentier and et.al., 2012).
2