6 Decision Making Tools to Make Better and Informed Business Decisions

Decision making tools are very important to every organization to make well-informed and better decisions. Because the success of a business depends on the decisions taking by its leaders. Leaders of organizations make decisions daily. So, these tools help them to make better decisions by identifying various possible alternatives of their decisions such as the cost, benefits, and the chance of success or failure. This article explains some decision-making tools to make better and informed business decisions.

Decision making tools for business decisions

Cost-benefit analysis

This is the process of analyzing the benefits and costs of an action or decision. So, this tool helps to weigh the benefits of decisions against their costs to determine the optimal decision from an economic perspective. This decision making tool helps you to choose the decision that gives maximum return on investment (ROI). To make use of this tool, you must be able to measure all the benefits of the decision together with the costs to incur. By doing this, you will be able to take the decision that brings greater benefits to the organization. The benefit can be in the form of profit generated from the decisions.

SWOT Analysis

This is the process of analyzing the strengths, weaknesses, opportunities, and threats of the organization during strategic planning to determine the ability to achieve the corporate objective. This decision making tool helps to identify the forces that will influence an initiative, action, or decision. However. It helps to identify the strengths and weaknesses (internal factors) of an organization as well as opportunities and threats (external factors). All this information will help you to make well-informed and better business decisions. It helps leaders or managers to take advantage of their strengths and develop strategies to minimize or turn their weaknesses into strengths.

Pareto analysis

This analysis is also known as the 80/20 rule. It simply means 20% of every activity will account for 80% of results. I.e. 20% of factors will contribute to 80% growth in the organization. This decision making tool helps you to identify the problem and resolve such problems. It was named after Vilfredo Pareto who propounded the occurrence of 80/20 distribution in the world. The tool helps the managers of the company to identify the decisions that will be most effective for the organization. By drawing a Pareto chart, you will be able to identify and solve problems. It usually contains both a graph (cumulative) and bars (frequency) by representing the individual values with bars and cumulative values with a graph.

PESTEL analysis

This analysis involves the analysis of external factors of an organization to identify the opportunities available in the market as well as threats. PESTEL simply stands for political, economic, socio-cultural, technological, environmental, and legal factors. So, it helps managers to take better and timing decisions by analyzing external factors. It helps them to predict the future using current trends.

Decision matrix

This decision making tool helps to assess various alternatives of a decision. It helps managers to assess the alternatives against the established business criteria. Therefore, the Decision matrix helps to make the right choice when the company is dealing with multiple choices. It helps to identify and analyze the performance of an organization’s system. It involves identifying the best alternative by creating a table with all the alternatives and the factors affecting the decision in the first column and first row respectively. Then, compare the score of the alternatives to identify the best option.

Break-even analysis

This analysis helps managers to identify the stage at which the company will be able to recover its cost. It helps to determine the point at which a new product or branch or business will start yielding profit. It helps the company to determine the number of units of its products or services to sell to recover the costs.

Conclusion

In conclusion, understanding the decision-making tools will help the managers or leaders of the organization to make the best decisions. It will help to make the choice that will give optimal results. By doing this, it will enhance the attainment of the business objectives.

Related Articles

The Concept of Entrepreneurial Leadership and its qualities

Business Valuation: How to Determine the Market Value of a Business

7 Simple Tips on How to save money to start a business

6 Key Benefits of Business Plan to the Business

2 thoughts on “6 Decision Making Tools to Make Better and Informed Business Decisions

  1. Pingback: The Concept of Break even Analysis and its benefits -
  2. Pingback: How to Write a Business Plan for a Business and its Importance -

Leave a Reply

Your email address will not be published.