MGT602: Business Decision Analytics - Holden Case Study Report

This report presents a case study analysis of the Holden automobile company, formerly General Motors-Holden, focusing on the business decisions that led to its eventual closure. The report begins with a company background, tracing Holden's history and its evolution as a subsidiary of General Motors. It then analyzes the business case, detailing the factors contributing to Holden's decline, including fluctuating export sectors, the strength of the Australian dollar, and reduced government subsidies. The core of the report lies in theorizing the decision-making act, applying Herbert A. Simon's bounded rationality model to understand how executives made decisions. The report evaluates the justification of the model's impact, highlighting the cognitive limitations of decision-makers and their reliance on satisficing rather than optimization. The conclusion summarizes the findings and offers a recommendation that, while the bounded rationality model was impactful, considering autonomous cars and electrical technological advancements could have saved the company.

Running head: CASE STUDY REPORT
CASE STUDY REPORT

CASE STUDY REPORT 1
Table of Contents
Company background......................................................................................................................2
Business case analysis.....................................................................................................................2
Theorizing the decision-making act.................................................................................................3
Evaluating the justification of the model’s impact on decision.......................................................3
Conclusion and recommendation....................................................................................................4
Reference list...................................................................................................................................5

CASE STUDY REPORT 2
Company background
Holden is an automobile marque in Australian that was formerly called General Motors-
Holden. The company was a manufacturer of cars before they opted to import cars under the
brand name Holden. Holden was founded in the year 1856 in Adelaide; however, the
headquarters of the company is in Port Melbourne currently ("Holden Australia | New Cars,
Offers, Dealers & Services", 2020). The company, later on, went to become a subsidiary of
General Motors or GM based in the United States of America.
Business case analysis
The export sector of the company has been fluctuating since 1950 as the selling of large
cars has declined in Australia leading the company to move to international markets for an
increase in profitability. Even after the decision taken by the company executives, Holden since
2010 incurred huge losses as the Australian dollar became strong along with the reduction of
subsidies and grants by the government (Toh, 2020). Finally, the company decided to cease all
production after 2017 and General Motors announced the retirement of the brand in 2020 by
shutting engineering operations, designs as sales by 2021. The decision was based upon the
global economy that is changing rapidly along with the consideration of the fact that Holden sold
right-hand-drive cars in two markets only. Furthermore, GM motors decided to bring Holden to a
close as they decided to limit their exposure to the overseas market that is challenging while
focusing on investing their efforts and resources in electronic and autonomous technologies
(Toh, 2020). The executives, managers, and owners of Holden as well as General Motors made
the decisions based on their rational behavior of the classical economy.

CASE STUDY REPORT 3
Theorizing the decision-making act
Following the theory by Herbert A. Simon,, it can be stated that the company made all
their decisions for the revival as well as the survival of the company by relying on the rational
economic behavior that helped them to analyze available information concerning the
development of car sales so that they can secure an optimized result (Ortega, 2018). However,
according to the bound rationality model by Simon, it can be specified that the decisions taken
by the firms were about sufficing and satisficing instead of optimization. The economic theorist
believed that it is not possible for a human mind to process and possibly obtain all information
that is available concerning a certain context. Therefore, the decision-makers seek and utilize the
information that is available to produce a result that is satisfactory or good enough as humans are
bound by their cognitive thoughts (Kotlar & Sieger, 2019). That acts as the basis of the inclusion
of the model in their decision-making process as well as for the evaluation process for this paper.
Evaluating the justification of the model’s impact on decision
Therefore, the decision-makers for the company elected to identify the issues of economy
and overseas market challenge as the cause for shutting down the firm that was struggling to
maintain its position in the changing world economy along with the pressure from the Australian
dollar. The model of bounded rationality is an alternative approach for a decision-making
mathematical model that the decision-makers used for economic and business management
related fields (Kotlar & Sieger, 2019). Rationality as optimization is complemented by the
process of decision-making that the Holden company executives adopted concerning the
challenges they faced in the field of automobile manufacturing and export. Humans have
cognitive limitations and a thinking capacity that is bounded by the structures of the environment

CASE STUDY REPORT 4
surrounding them. The mind compensates for the limitation of resources that the mind can
fathom by exploiting the act of sufficing. The individuals responsible to develop a plan to resolve
the issues faced by Holden were able to comprehend what their cognitive mind allowed them and
that resulted in the decision of the company to resolve Holden within a year (Ortega, 2018).
The computational resources of these people were finite and they could only rationalize a
suitable outcome that their immediate environment provided. Their rational ignorance prevented
them from looking further down the road into a detailed analysis of the world economy as well
as the iconic imaging of the brand in Australia as they resorted to the shutting down of the
company (Schilirò, 2018). They only analyzed the downward slope that the company sales faced
and considered taking any more risks for the development of the firm as insignificant to the
economic improvement of the individuals.
Conclusion and recommendation
In conclusion, the paper has successfully justified the bounded rationality model to
understand how it affected the decisions taken by the company for the future. However, the
aspect of autonomous cars and electrical technological advancements in the field of automobiles
could have been extended to Holden as well to save the company from the closing shop (Ortega,
2018). Nonetheless, the bounded rationality of man prevented it while considering shutting down
the firm as the optimal and best possible option for the future of Holden.

CASE STUDY REPORT 5
Reference list
Holden Australia | New Cars, Offers, Dealers & Services. (2020). Retrieved 10 April 2020, from
https://www.holden.com.au/
Kotlar, J., & Sieger, P. (2019). Bounded rationality and bounded reliability: A study of
nonfamily managers’ entrepreneurial behavior in family firms. Entrepreneurship theory
and practice, 43(2), 251-273.
Ortega, R. P. (2018). Bounded Rationality in Decision-‐-Making. JOURNAL BUSINESS OF
SCHOOL, 34.
Schilirò, D. (2018). Economic Decisions and Simon’s Notion of Bounded
Rationality. International Business Research, 11(7), 64-75.
Toh, M. (2020). General Motors is killing off the Holden brand and pulling out of Australia.
Retrieved 10 April 2020, from https://edition.cnn.com/2020/02/17/business/general-
motors-holden-australia/index.html