Render et al. (2015, p.79) revealed that the use of decision trees actually vary from the most simple to a more complex decision. The reason for this is that it not only graphically represents the decision points but also enhances the alternatives of each chosen decision node (Render et al., 2015, p.80). The additional value of a decision tree is that probability percentages are assigned to the decision point while payoff values are forecasted for each alternative (Render et al., 2015, p.80).
In the business field the decision trees can be primarily used in terms of stock investment decisions (CBCB, 1995), expansions or abandonment of operations (Brealey, Myers, and Allen, 2014, p.258), and with regards to ethical decisions (Boundless, 2016). Due to the complex nature and operations of some businesses, the use of decision trees can be applied not only to domestic operations but also international ones as well. This is because the ultimate goal of business managers is to improve the company profitability by deciding on internal and external investments. However, these internal and external decisions can be affected by ethical factors such as the management of manufacturing facilities in developing countries especially by a global company (Daily, 2011).
Business decisions using decision trees or other quantitative methods must adopt ethical factors in their alternative choices especially with regards to employee management and handling (Boundless, 2016). One reason for this is that third party individuals or groups can influence the perception of the company consumers, which can either improve or worsen the company’s sustainability and profitability. This was seen in the case of apparel companies (Daily, 2011) where the use of substandard working conditions for its factory employees decreased operating costs while increasing profitability but resulted to a negative perception from desired consumers. The effect of a poor supplier choice (Enyinda and Bell-Hanyes, 2010, p.25) reflects the decision making skills of the company management (Daily, 2011).
One crucial company decision that can be enhanced by the use of a decision tree is the choice of suppliers (Enyinda and Bell-Hanyes, 2010, p.25). This is because the correct choice of a company supplier can result to a long-term improvement in the company operations and external perception (Enyinda and Bell-Hanyes, 2010, p.25). However, the wrong choice can lead to worsening company operations and external perception (Enyinda and Bell-Hanyes, 2010, p.25). This was seen in the case of an apparel company wherein the use of substandard working conditions was primarily due to the wrong decision of the company management (Daily, 2011) resulting to heavy criticism from international watchdogs.
References
Boundless. (2016). Applying the decision tree. Boundless. Retrieved from https://www.boundless.com/management/textbooks/boundless-management-textbook/decision-making-10/considering-ethics-in-decision-making-79/applying-the-decision-tree-382-475/
Brealey, R. A., Myers, S. C. and Allen, F. (2014). Principles of corporate finance (11th ed.). New York, NY: McGraw-Hill Irwin.
CBCB. (1995). 2.8 selected real-world applications. CBCB. Retrieved from http://www.cbcb.umd.edu/~salzberg/docs/murthy_thesis/survey/node32.html
Daily Mail. (2011). Nike workers ‘kicked, slapped and verbally abused’ at factories making Converse. Mail Online. Retrieved from http://www.dailymail.co.uk/news/article-2014325/Nike-workers-kicked-slapped-verbally-abused-factories-making-Converse-line-Indonesia.html
Enyinda, C. L., and Bell-Hanyes, J. (2010). A model for quantifying strategic supplier selection Evidence from a generic pharmaceutical firm supply chain. International Journal of Business, Marketing, and Decision Sciences, 3(2). 25-44.
Render, B., Stair, R., Hanna, M. E., and Hale, T. S. (2015). Quantitative analysis for management (12th ed). United Kingdom: Pearson Education Limited.
