Decision Making Under Uncertainty and Risky †MyAssignmenthelp.com

Question: Discuss about the Decision Making Under Uncertainty and Risky. Answer: Introduction: The said report discusses about Boltt, an Indian company founded recently by a brother sister duo from the capital city of the country i.e. Delhi. The world is running behind staying fit and thereby are seen spending huge amount in the gyms, yoga and such other fitness centres. The siblings joined together to manufacture technology by the name of Boltt which makes such a technology which is wearable and have the ability of tracking ones fitness status along with the facility of AI (artificial intelligence). The technology is so different that it gives the user real time guidance on health and such other fitness choices (CNBC. 2016). Even though the technology is different and attractive, yet it needs to reach many people across the globe and not only nationally. Thereby the starters had certain objectives in mind while floating the said business. The report details those objectives which are a part of most of the start up companies, specially one like this which supplies such unique products. Every start up company first and foremost aims at surviving in the competition. As per renowned statistics, it is concluded that many companies tend to shut down within a span of a year, thereby it can rightly be said that Boltts first and foremost aim as a start up would have been to ensure its sustainability in the market. The only solution for a business to exist and survive is to achieve break even i.e. a situation of a no profit no loss. Thus the sales a business makes and the revenue it earns is able to at least suffice the expenditure it has to make. Thereby growth and profitability depends upon whether a business is being able to survive successfully in the short term. Boltt Sports Technologies being a private company has one of the major objectives as maximisation of profits like all such other companies. Further to this the biggest competition it has is with the gyms and yoga centres. Thereby it needs to hit that part of the crowd who are a diehard fitness fan. The kind of technology it uses definitely calls for a lot of investment and thereby the cost of the product would also be high, Hence it is clear that the company mainly caters to a very niche segment and hence may not be able to reach all the houses. The owners main aim would be to make maximum profit out of the same since it is first of its kind and before any other company starts to supply such a kind of a product at a cheaper rate, they should do differential pricing and earn the maximum out of it. Before the product becomes common and available and supplied by many vendors, the actual founder has the opportunity to make maximum profits out of it, thereby reducing the prices as per the demand in the market. Further they would need money to re-invest and produce better products day in and day out, therefore one of the most crucial objective is maximisation of profits for the re-investment purpose as well. Only profit maximisation is not the sole aim for any company. Profit can be maximised by selling a combination of products wherein some would yield higher percentage of profit as compared to some other which would yield a lower profit. Quantification of the sales is also important for any start up company as they cannot afford to stock up their products for long. Thereby in order to achieve greater profits, a company will have to ensure to achieve higher sales on a year on year basis. Hence if the sales are maximised then it would help to keep the competitors also away. Making profit maximisation as the sole aim or objective of the business may not help a new business venture survive for long. There another major objective as is discussed above is to gain maximum share in the market. Turnover is a major survival strategy and to grab a major share in the market is a must else the start up companies would attain stagnancy once the old players come into the competition even if the product supplied by Boltt is unique. It may happen that initially in order to gain a huge share in the market and increase the sales, the company may have to compromise with regards its goal of profit maximisation, however the same would be only for a short duration. Revenue maximisation as a goal would help Boltt gain a huge customer base and build up loyalty, enable to keep away competition, achieve economies of scale by keeping the price low but ensuring the sales is high quantity wise and if they look towards pursuing revenue maximisation, then it would automatically lead to greater profits in the near future (Pettinger 2012). Thus on a concluding note, it is understood that every company has various objectives which it fulfils in order to achieve maximum profit and increase its sales to the highest numbers. These objectives undergo changes as and when a company grows but however, when it comes for a start up company the goals and objectives are no different. Most of them are established with the main objectives of maximising profit, sales and revenue and to ensure to develop such strategies so as to survive. Boltt is also adopting the same methodologies for increasing its share in the market, thereby maximising profits. Financial modelling is an important part of the financial theory. These models helps various economists and theorists reasonably and rationally segregate and sort out complex manacles of cause and effect and manipulate among the several intermingling essentials in an economy. Thereby it can be said that economic models are nothing else but a cut down portrayal of truth, intended to yield theory about the financial performance that can be experienced. The past years have made the economists formulate various models of the economy, however there are a range of deviations also associated with it, however two of the most basic ones are Classical and Keynesian model. He former one as the name connotes is an age old theory and the latter one is the latest one named after the renowned economist, John Maynard Keynes. The second model came into existence after the great depression of 2008. The Classical Model, was there into existence and most renowned pre great depression period. As per the said model, the economy is a free flowing one and the price, cost and wages of people are freely adjustable with regards the ups and downs of the demand over a period of time. Thus it can be said that the theory spells out the fact that when the economy is at a boom, the prices and wages shoot up also and when the economy is not performing well, then the wages and prices fall down freely adjusting themselves to the downfall. The said model assumes that in an economy there lies no unemployment thereby all the resources are being used at its full power. The economists mainly conclude that if the competition is given a free hand to work, then the economy will robotically incline in the direction of full employment (study.com. 2016). As per this model, which came into being after the Great Depression, the renowned economist John Maynard Keynes concluded that the economy does not always provide employment to all those who are eligible to work. Thus the economy can never be at equilibrium and it can be less or above its full capacity. At the time of the Great Depression, many people lost their jobs, business houses had to shut down and the economy was working at a capacity which was much below its actual potential. Then the economist Keynes noticed that the economy was not correcting itself by self and the government and other monetary bodies should join hands to lift up the economy. Thus as epr this model it is clear that the economy can be strong as well as weak at times. One of the most sought after real life example of the said model is that it had inspired the former President of USA, Barack Obama for saving the falling economy of the country by ding a lot of government expenditure (Davidson Blumberg, 2009). Although his ideas were criticised by many, but he was the one behind contemplating the fact that for any economy to grow, the support of the government is a must. The talent of the management comes to light at the time of depression or when the business is not doing well and how they make strategic decisions under such unwarranted scenarios and ensure maximum utilisation of resources. In the particular scenario, Nakheel had been able to reap in considerable profits even if the real estate market conditions were not at a boom simply because the management had taken adequate decisions under such bad scenarios as well which led to the maximisation of the available resources. Decision making is an integral part of every step a person takes, be it personal or professional. Thereby how and in what conditions decisions are behind made is very important to understand. When the economy is turbulent, then the business houses lack availability of various data which would help them take decisions in an informed manner, thereby concluding that the scenario is risky and uncertain as well. When asked how they could manage the same, the managers replied that they used certain decision analysis tools which helped them to deal with the risks and the uncertainties. When a decision maker does not possess exact data or there lies a risk in the data revealed, this is the condition when he has incomplete data about the available resources but at the same time has a decent idea of the likelihood of results for every substitute. Thus under such a condition, the managers must calculate various probabilities attached with every substitute available basis the data and the experience of the manager (Taghavifard et.al. 2009). However, the complexity of the economic environment has increased to such an extent that many of the decisions are taken in a state of uncertainty. The decision maker is not well versed of the data, the attached risks and the outcome of various substitutes. During such a scenario, various decision making tools help the managers to take decisions under risk and u ncertainty. The management in the particular scenario would have done various analysis before arriving at a particular decision. The size and nature of the risk associated with a decision should be analysed in detail. It takes into account both quantitative as well as qualitative risk measurement, supervision and communication and there extend to the managers with a tool which helps in better accepting of the threat and the reimbursement associated with the proposed course of action. The resolution is a clear representation of trade-off between the risk and the payback connected with a specific way of achievement under circumstances of ambiguity. Another very successful method is that by making a decision tree. It calls for drawing the various solutions graphically and the expected results and risks attached to it. This methodology of making decisions during times of risk and uncertainty helps the management take the most apt decision thereby enabling them to maximise profits during law seasons as well (Rawat, 2017). Thereby it can be rightly said that the decision analysis tools are of great help during the time of risk and uncertainty as it was to Nakheel who even when the real estate business was at its low, earned huge profits. In the said approach of making decisions, the various substitutes to a particular situation are plotted in detail and the analysis of the same would help arriving at a decision which is best for both the up-front as well as the downstream decisions. References: CNBC. (2016). Boltt Sports Technologies, India. Retrieved from https://www.cnbc.com/2016/11/17/10-of-the-worlds-hottest-start-ups-in-2016.html#slide=10 Pettinger,T. (2012). Profit V Revenue Objectives for firms. Retrieved from https://www.economicshelp.org/blog/5318/economics/profit-v-revenue-objectives-for-firms/ Davidson,A. Blumberg,A. (2009). Obama Gives Keynes His First Real-World Test. Retrieved from https://www.npr.org/templates/story/story.php?storyId=100018973 Study.com. (2016). The Keynesian Model and the Classical Model of the Economy. Retrieved from https://study.com/academy/lesson/the-keynesian-model-and-the-classical-model-of-the-economy.html Rawat,S. (2017). Decision-Making under Certainty, Risk and Uncertainty. Retrieved from https://www.businessmanagementideas.com/decision-making/decision-making-under-certainty-risk-and-uncertainty/3371 Taghavifard, M.T., Damghani,K.K., Moghaddam,R.T. (2009). Decision making Under Uncertainty and Risky Situations. Retrieved from https://www.soa.org/library/monographs/other-monographs/2009/april/mono-2009-m-as09-1-damghani.pdf