Evaluation of Alternatives inwards Decision Making
After making all the alternatives, the side yesteryear side stride inwards planning or inwards decision making is to evaluate these alternatives. Evaluation is required inwards social club to choose the best option for implementation.
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While evaluating alternatives, the managers must compare the option plans or decisions. For this, the managing director must take in the quantitative too qualitative factors.
- Quantitative Factors : The quantitative factors are those factors that tin travel measured numerically. For e.g. Number of units sold, costs inwards rupees, etc. The quantitative factors are tangible inwards nature.
- Qualitative Factors : The managing director must too take in the qualitative factors. The qualitative factors are intangible inwards nature for e.g. character of labour force, client satisfaction, etc.
The administration must rank importance non entirely to quantitative factors only too to qualitative factors. For e.g. An fantabulous production invention could non hit its targets, due to bad character of labour force, wretched maintenance of machines, etc.
Techniques for Evaluation of Alternatives
The methods or techniques for the evaluation of alternatives are:-
- Marginal Analysis : To evaluate alternatives, a managing director may role the marginal analysis technique. The marginal analysis technique helps to compare additional revenues amongst additional costs. If the additional revenue is greater than the additional costs, to a greater extent than lucre tin travel made yesteryear producing more. However, if the additional revenue is less than the additional costs, to a greater extent than lucre tin travel made yesteryear producing less.
- Cost Effectiveness Analysis : This technique is an improvement of the traditional marginal analysis. In this case, the managing director considers the cost-benefit analysis. The option that provides the maximum benefits at the minimum damage is selected. The damage tin travel measured inwards terms of money, time, risk, goodwill, etc. The primary characteristic of damage effectiveness analysis is that it gives importance to the results.
