Decision Making Approach for Optimal Business Investments

Abstract

The decision-making (DM) processes are increasingly playing an important role in business management. The optimization in operational, tactical and strategic decisions can provide to the firm a position of advantage over the competitors. DM is defined as a criteria selection method to choose the best alternative that lets to the firm get the objective. Some of the most important stakeholders involved in the DM processes are described. In this chapter, Decision Trees allow taking into account all the possible alternatives, but it requires a large computational cost, that will be depend of the order of variables. In order to carry out this task as easy as possible, different ranking methods are explained. It is important to say that there is not a method to order the variable providing the best solution in all the cases. This is why several methods are presented such as Top-down-left-right, Depth First Search, The Breath First Search, Level Method and AND Method. Once all the alternatives have been taken into account, Binary Decision Diagrams provide an analytical expression to approach the interrelation between all variables what becomes an optimization function. The optimization function will be usually subject to different constraints related to the availability of resources of the firm. Once the optimization has been carried out, it is easier to establish an optimal strategy to allocate properly the available resources. In this chapter, a case study is presented to facilitate the reader’s understanding of the proposed method hereby. Finally, some conclusions are gathered from the application of this method.