What is the analysis of the tree decision -making?

Tree analysis of decision -making is a method used by a graph decision -making, which shows all possible results that may arise from one original decision. As the original decision leads to other decisions, the graph adds branches for all new options. Estimates are made from the hypothetical values ​​of each result and the possibility is that every result actually occurs. Through this process, the tree analysis does not miss any possible result and can show what is the best way based on probability.

In the business world, decisions must be taken virtually every day by managers and executive officers. Some of these decisions may not seem like large shops, but others may have a significant impact on whether the company will be successful. This is especially true for those decisions that require a large commitment to capital. For such decisions, this is a good idea for those who choose to watch all the various unforeseen events that may everIknout from the original decision. Analysis of the tree decision -making is a good way to achieve this.

The first step in creating a tree of decision -making is to draw a box with two lines of it. These two lines represent elections between which the company must choose. If one option leads to another option, another box is drawn at the end of the line and additional lines may appear from this box. This process continues until the elections lead to a certain result.

The results

are represented in the analysis of decision -making on circles. Circles represent all possible results from selection. For example, the choice could show up well, it may prove to be wrong, or it could show average. Those who perform the analysis must determine both the chances that these results can occur, the monetary value that is worth the result. For example, the choice to do something can have a 30 % chance of very well, which would be worth 500,000 uSD (USD) for the company.

By doing some simple mathematics, the company can use the tree analysis to find out which of the original two options is better. The costs that would be connected to each specific option must be deducted from the corresponding values. After the tree back through the results, it will bring approximate values ​​for each of the two original options, which will reveal which one is likely to return the highest value of the company.