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Decision Making Model Analysis (mgt350 Week 1)

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Decision-Making Model Analysis

The Great Escape NCO Club is a military bar in Hohenfels, Germany. Their parent office is the Hilltop Officers Club. During my employment at the Great Escape, in 2002, their profit margin was more than adequate, but they faced the possibility of having to close the business. The Officers Club was not able to meet their budget and fell well below income requirements. If the club system, in general, was not making enough income then the entire club system would be forced out of business.

The six-step rational decision-making process model helps describe how the financial issues with the club system could have been alleviated.

1. Define the problem:

• The dilemma faced at the Great Escape was trying to reduce overhead expenses and produce enough revenue to constitute keeping their doors open for business, as well as helping ensure the Officers Club met their budget requirements.

2. Identify the criteria:

• Evaluate expenses. Geoff Williams, in his article Name Your Price, says to pay special attention to those expenses that seem to be quite high or rapidly rising (2005).

• Evaluate prices to find out if they had competitive rates with civilian clubs, or if they could raise their prices to create more income.

3. Weight the criteria:

• Profit margin was high enough to sustain the club, but not the parent club.

• Overhead expenses were evaluated. Utilities, prices of products purchased for resale, and costs of items written off as spoilage were too high.

• Prices charged to customers were well below the average of the civilian community.

4. Generate alternatives:

• Go out of business.

• Research ways to reduce overhead costs.

• Raise prices charged to customers to become more competitive with similar civilian businesses.

5. Rate each alternative on each criterion:

• Going out of business would have left many transient soldiers without a club system on post. Many of the soldiers did not have vehicles when they arrived in the area for training and/or deployment. Therefore, the soldiers were unable to travel off post for entertainment purposes.

• Reduction of overhead expenses would save the club system a lot of money. Purchasing resale items in larger quantities would cost less but leave more money sitting on the shelves until items are resold. Holding employees responsible for items written off as spoilage would have made them more cautious when handling resale items.

• Raising prices charged to customers would have produced more revenue. Soldiers would still have needed to pay less on post than they did off post to ensure their patronage to the club system.

6. Compute the optimal decision:

• Reduce overhead expenses. Turning the temperature

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