Question

A management decision model comprises of the following elements:
A. A clear idea of what is to be achieved
B. An appreciation of insource constraints
C. An identification of risk factors
D. A comparison of payoff value with input costs
Choose the correct answer from the options given below:

• A. A, B and D only
• B. A and C only
• C. A, C and D only
• D. B, C and D only

Hint:

A good decision model answers three basic questions: 1. \textbf{What do we want?} (Objective - A), 2. \textbf{What could go wrong?} (Risks - C), 3. \textbf{Is it worth it?} (Cost vs. Payoff - D).

Answer 1

The Correct Option is C

Step 1: Outline the standard process of rational decision-making. Step 1: A formal decision model involves a structured approach to choosing between alternatives.
Step 2: Evaluate each element's role in a decision model.
Step 2:

(A) A clear idea of what is to be achieved: This is the objective or goal. It's the first and most crucial step.
(B) An appreciation of insource constraints: This is too specific. A decision model considers *all* constraints, both internal (insource) and external (e.g., market conditions, regulations). Focusing only on "insource" constraints is incomplete.
(C) An identification of risk factors: Analyzing the potential risks and uncertainties associated with each alternative is a critical part of any sound decision model.
(D) A comparison of payoff value with input costs: This is essentially a cost-benefit analysis. Evaluating the potential outcomes (payoffs) against the resources required (costs) is central to choosing the best option.
Step 3: Identify the essential components.
Step 3: A clear objective (A), risk identification (C), and a comparison of costs and benefits (D) are fundamental elements of a management decision model. Element (B) is too narrow and less universally applicable than the others. Therefore, A, C, and D are the best combination.