Decision Analysis – Definition

Cite this article as:"Decision Analysis – Definition," in The Business Professor, updated July 30, 2019, last accessed August 12, 2020, https://thebusinessprofessor.com/lesson/decision-analysis-definition/.

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Decision Analysis Definition

Decision analysis (DA) is a management technique used by corporations in evaluating choices and decisions to be made in relation to the business. DA adopts a variety of tools and strategies to determine information that are relevant to a decision making process. The major aspects incorporated into decision analysis (DA) include philosophy, psychology, economics, among others.

Decision analysis was developed in 1964 at Stanford University by Ronald A. Howard, a professor of Management Science. DA also uses statistical tools, quantitative, qualitative and systematic approaches, multivariate analysis, decision tree analysis, probabilistic and visual approaches. All the above measures are used in assessing decisions made by management of corporations as well as the likely outcomes of the decisions.

A Little More on What is Decision Analysis

If an organization or a small business wants to make critical decisions relating to business, investments or risk management, decision analysis can be adopted.  DA is commonly used when a business or an organization has multiple choices or variable alternatives when a business decision is to be made. Decision analysis can be employed when decisions about marketing and operations, management and strategic decisions.

Example of Decision Analysis

Assuming a large corporation named Brad and Stanley Inc. domiciled in the United States wants to make a strategic decision on where to plant a new business location, the decision analysis technique can be used by this organization.  Using DA, the organization will assess several choices that are available regarding the location to be selecting. After evaluating the variety of information available using statistical tools such as systematic and quantitative approaches, the decision can be made. For instance, decision analysis might entail evaluating different locations, shopping habits of people in the location, success and failures of businesses present at the location, among others.

However, there is a strong criticism against decision analysis as a tool, critics argue that an organization might be left without making a tangible decision at the end of the day due to overthinking.’ This happens when analysis paralysis occur.

Reference for “Decision Analysis – DA”

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