How the effective planning and decision making contributes to competitive advantage in a company essay

The present essay describes the way the effective planning and decision making contributes to the competitive advantage in a company. The essay concentrates on the work and management decisions of Gerber Products, Inc. and on decision tree structure, risk profiles and tradeoffs of the company.

Making smart choices is the basic life ability, relevant to everyone: business people, teachers, physicians, lawyers, and students as well as young, old people. Smart choices may help any organization to reach the goals (Hammond, Keeney, Raiffa, 2002). Management always comes across situations when uncomfortable decisions should be made. Sometimes, the complexity may be that, though some options are clear, the consequences of the options are not obvious. One nice and helpful tool for an executive in this case is the decision tree analysis. Decision trees may provide help to executives in making tactical decisions. A decision tree is a diagram involving branches and nodes. The nodes may be of two different kinds. The first is a four-sided figure that presents the decision to be made. The second type is a circle. It represents possibility nodes. The options emanating from possibility nodes have a component of doubt as to whether or not they will take place. The major advantage of this analysis is that it gives a diagram, representing the options.

Gerber Products, Inc., the famous baby products organization, lately utilized decision tree analysis in deciding whether to carry on utilizing the plastic poly-vinyl chloride (PVC). The case involved many organizations including the environmental assembly Greenpeace. Generally speaking, PVC is a plastic material used in many goods including toys. To make poly-vinyl chloride soft, a chemical plasticizer phthalates is put to soften the plastic. But Greenpeace found this substance very carcinogenic. The problem became more complicated for Gerber Products, Inc. when the newspapers concentrated on goods made for oral use by kids. So, Gerber organization had to estimate all present data, consider the consequences of every possible action, and continue on the most careful course. Gerber knew that a huge body of scientific proof shows that phthalates are totally safe. However, when the Greenpeace statement was issued, the Consumer Product Safety Commission had to issue an announcement concerning all these doubts. The Consumer Product Safety Commission informed Gerber organization that they would issue some information concerning possible dangers of phthalates, and Gerber would be mentioned among the companies involved. This is the point where Gerber put into practice a decision tree.

Gerber faced 2 choices, neither of which was really beneficial. The company could wait for the press release, and judge consumer response before making an action, or it could pursue declaration of the dilemma regardless of the public’s response to the press release. Gerber projected 8 probable outcomes on the decision tree. If the Gerber reacted proactively, and the CSPC report issued a word of warning, Gerber anticipated an 80 percent opportunity that people would react optimistically to Gerber’s responsiveness causing sales to amplify over competitors who moved slower. If the report is unenthusiastic and a recall is issued, Gerber Products foresaw 25% probability that it could protect existing sales with the help of a proactive response. Nevertheless, there was 75% probability that a recall would damage sales by $1.25 million. The worst picture is if Gerber stays inactive and the CSPC report calls for a recall.

Utilizing a decision tree, Gerber Products, Inc. made a decision that the most beneficial alternative was to start own solutions without expecting for the CPSC press release. Thus, Gerber Products, Inc. hoped for some positive information that would provide a strategic benefit over competitors who selected another path (Buckley, Dudley, 1999). So, decision trees allow managers to utilize available data to articulate probable scenarios of future actions even though vital pieces of data may be missing. Unluckily, some imperative branches of the tree may be missing as they are not simply transformed into economic terms. But the capability to foresee economic outcomes can still play a primary role in decision-making (Levine, 2003). Subsequent to the brave and fast actions by Gerber, phthalates were allowed for usage in toys by the main American product safety commissions.

Gerber used precision tree to create a risk profile graph that compares the payoffs and risk of dissimilar decision alternatives. It demonstrates likelihood and cumulative charts showing the probabilities of dissimilar outcomes and of an outcome less than or equal to a firm value (Buckley, Dudley, 1999). A risk profile allowed Gerber to get an outline of its main risks including an understanding of the company’s operational background and aims with respect to managing risk. A risk profile mainly depicts an organization’s main risks that include threats and chances. Generally speaking, risk is the representation of the possibility and influence of an incident with the potential to involve the accomplishment of the company’s goals. As an output from a risk estimation process, a risk profile enhanced Gerber’s decision making related to setting and resource distribution. A risk profile provides staff and partners with a “picture” of the organization’s risks and may assist in identifying spheres of competence and potential chance. How a company presents its risks differs from company to company, however, Gerber managed to use this data to cope with key risks effectively. The risk profile is recommended as an informational tool and as a tool that supports decision-making.

Gerber products also used risk tradeoffs in risk management. They paid attention to the risk communication with an emphasis on food safety and chemicals in the environment. There interests involve the scientific basis on human health risk estimation, application of risk estimation to decisions and risk tradeoffs in risk management. The concept of trade-offs applies to all decision making at every level. It is not limited to merely economics, except for the fact that the revise of economics in its broadest definition involves all decision making. An example of trade-offs in decision making: what to produce. A business that uses resources to create one good cannot use the same resource to make another good. What it gains from producing one thing, it loses from not producing the other thing. It will maximize profits by producing what it is best at (Buckley, J. Dudley. 1999).

For scientists defining risk-benefit trade-offs means weighing the risks and advantages of chemical particles compared to those associated with materials that are now in use. A case in point is the application of nanoshells to treat cancer. Lately though, some worries about the potential hazards of chemical particles for human health and the environment have been raised. The debate had shocking consequences for the crop industry (Institute of Medicine, 2006). And Gerber Products had to make a decision under public pressure that it would not use genetically modified ingredients. Risk tradeoffs are ever-present in our society, and organization’s managers frequently weigh risks and countervailing risks, either explicitly or implicitly, in making decisions (Weber, Baron, Loomes, 2001).

So, the initial job of the manager is to recognize the choice that has to be made based upon a certain situation. Then, the manager needs to think of all the probable options that could be put into practice to “solve” the problem. A giant of the children food industry, Gerber Products benefits from a firm reputation as the leading supplier of baby products because managers of the company use decision tree structure, risk profiles and tradeoffs while decision making.