Scribd
Upload
12 views

Lecture 1 (Self-read)- Chapter 1 - Introduction to Quantitative Analysis(1)

The document provides an introduction to quantitative analysis in business, highlighting its importance in decision-making through examples of successful applications by companies like Heineken and Sony. It outlines the steps involved in the quantitative analysis approach, including defining problems, developing models, and implementing solutions, while also discussing potential challenges at each step. Additionally, it emphasizes the role of computers in facilitating these processes and includes assignments for further study.

Uploaded by

Tùng Nguyễn
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
12 views

Lecture 1 (Self-read)- Chapter 1 - Introduction to Quantitative Analysis(1)

The document provides an introduction to quantitative analysis in business, highlighting its importance in decision-making through examples of successful applications by companies like Heineken and Sony. It outlines the steps involved in the quantitative analysis approach, including defining problems, developing models, and implementing solutions, while also discussing potential challenges at each step. Additionally, it emphasizes the role of computers in facilitating these processes and includes assignments for further study.

Uploaded by

Tùng Nguyễn
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 22

Quantitative

methods for
business
Instructor: Dr. Huynh Thi Ngoc Hien
Email: [email protected]
Examples of Quantitative Analyses
for businesses
• Heineken saved over $150 million using forecasting and
scheduling quantitative analysis models.
• Sony increased revenues by over $200 million by using
quantitative analysis to develop better sales plans.
• Vietnam Airlines saved over $40 million using quantitative
analysis models to quickly recover from weather delays and
other disruptions.
LECTURE 1: INTRODUCTION TO QUANTITATIVE ANALYSIS

LEARNING OUTCOMES
• What is Quantitative Analysis?
• The quantitative analysis approach.
• How to develop a quantitative analysis model.
• The role of computers in QA approach.
• Possible problems in QA.
• Implementation – Not just the final step.
What is Quantitative Analysis?

Raw data Quantitative analysis

Meaningful information

Quantitative analysis is a scientific approach to managerial


decision making
whereby raw data are processed and
manipulated resulting in meaningful
information.
Using Quantitative Analysis to make decision
EXAMPLE

Expenses can be represented as the sum of fixed and variable


costs and variable costs are the product of unit costs times the
number of units
Profit = Revenue – (Fixed cost + Variable cost)
Profit = (Selling price per unit)(number of units sold)
– [Fixed cost + (Variable costs per unit)
(Number of units sold)]
Profit = sX – [f + vX]
Break-even point = f / (s-v)

where
s = selling price per unit v = variable cost per unit
f = fixed cost X = number of units sold
Using Quantitative Analysis to make decision
EXAMPLE
EXAMPLE

Bill’s company, Pritchett’s Precious Time Pieces, buys,

sells, and repairs old clocks and clock parts. Bill sells

rebuilt springs for a price per unit of $10. The fixed cost of

the equipment to build the springs is $1,000. The variable

cost per unit is $5 for spring material.


1.What is the profit model for Bill’s company?
2.How many springs would Bill’s company have to sell in
order to break even?
Using Quantitative Analysis to make decision
EXAMPLE

STATE OF NATURE

FAVORABLE UNFAVORABLE
ALTERNATIVE MARKET ($) MARKET ($)
Construct a large plant 200,000 –180,000

Construct a small plant 100,000 –20,000

Do nothing 0 0
Examples in Decision Making
HOURS REQUIRED TO
PRODUCE 1 UNIT

(T) (C) AVAILABLE HOURS


DEPARTMENT TABLES CHAIRS THIS WEEK
Carpentry 4 3 240

Painting and varnishing 2 1 100

Profit per unit


$70 $50

What is the best combination of chairs and tables to


maximize profit?
Maximize profit = $70T + $50C
subject to

4T + 3C ≤ 240 (carpentry constraint)


2T + 1C ≤ 100 (painting and varnishing constraint)
T, C ≥ 0 (nonnegativity constraint)
What are the difference between quantitative
and qualitative analysis?
What are the difference between quantitative
and qualitative analysis?
What are the difference between quantitative
and qualitative analysis?
Group discussion:
Location choice: What are the quantitative and
qualitative factor for your choices?
The Quantitative Analysis Approach
Defining the problem

Developing a model

Acquiring input data

Developing a solution

Testing the solution

Analyzing the results

Implementing the results


Step 1: Defining Problem
 Clear, concise statement of the problem
 Beyond the symptoms, identify true case
 Concentrate on a few problems
 Some specific measurable objectives are helpful
Defining the problem can be the most important
step.
Step 2: Developing Model
• The types of models include physical, scale, schematic and
mathematical models
• Variables (controllable, uncontrollable), decision variables
• Parameters
• Models: solvable, data are obtainable

Physical model Scale model

b 1X
$ Sales
+
Schematic model Y = b0

$ Advertising
Step 3: Input data

• GIGO principle (Garbage In, Garbage Out)


• From company document, reports
• Interview with employees and related persons
• Statistics

Garbage In

Process

Garbage Out
Step 4: Developing Solution
• Common techniques are
• Solving equations
• Trial and error – trying various approaches and picking the best
result
• Complete enumeration – trying all possible values
• Using an algorithm – a series of repeating steps to reach a solution
The input data and model determine the accuracy of the solution.

Step 5: Testing the Solution


• Before analyzing and Implementing
• Determine the accuracy and completeness of the data
• Test the robustness of the model
• Some hand calculation may be useful
Testing the data and model is done before the results are analyzed and
implemented.
Step 6: Analyzing Result & Sensitivity Analysis

• Determine the implication of results


• Sensitivity analysis: how the solution will change with a
different model or data

Step 7: - Implementing the results


• The need of Simulation; Good, workable solution
• Bad implementation: fail in efforts
Possible problems in the Quantitative Analysis Approach
1. Defining the problem
 Conflicting viewpoints
 Impact on other departments
 Beginning assumptions
 Solution outdated
2. Developing a model
 Fitting the textbook models
 Understanding the model
3. Acquiring input data
 Using accounting data
 Validity of data
4. Developing a solution
 Hard-to-understand mathematics
 Only one answer is limiting
5. Testing the solution
 All assumptions should be reviewed
6. Analyzing results
 How a solution will affect the whole organization.
7. Implementation – Not just the final step
 Lack of commitment and Resistance to change
 Lack of commitment by Quantitative Analysts
The role of computers and spreadsheet
models

• Use mathematics models require mathematical


calculations:
use computer to make these steps easier.
SUMMARY
• A scientific approach to decision making with the
Quantitative analysis: applications in real life and business
• Raw data  QA meaningful information
• (1) Defining the problem (2) developing a model  (3)
Steps of Quantitative acquiring input data (4) developing a solution (5) testing
approach a solution (6) analyzing the results and (7) implementing
the results
How to develop a • The profit model
quantitative model • Break-even point (BEP)

Role of computers • Make the steps easier

Possible problems of QA • Occur in each step of QA process

• Problem: a statement, which should come from a manager, that


indicates a problem to be solved or an objective or a goal to be
reached.
• Variable: a measurable quantity that is subject to change.
• Model: a representation of reality or a real-life situation.
Glossary • Input data: data used in a model in arriving at the final solution
• Parameter: a measurable input quantity that is inherent in a
problem.
• Sensitivity analysis: a process that involves determining how
sensitive a solution is to changes in the formulation of a problem.
ASSIGNMENTS
Text book: “Quantitative Analysis for Management, 11th edition”, Barry Render et. al.,
McGraw Hill, 2012.

Homework: don’t need to submit


• Assignments (Chapter 1): 1-14, 1-16, 1-18, 1-20 and 1-22.
• Self-Review Chapter 2. Probability

You might also like