Assignment on

Application or uses of Quantitative Technique and Tools in decision

Making
Course Name: Quantitative Analysis for Business

Course code: THM 323

Submitted To
Prof. Md Abdul Hakim
Professor
Department of Accounting and Information System
Faculty of Business studies
University of Dhaka

Submitted by
Mahmodul Hasan
ID: 63 Sec: A
Batch: THM 11th
Department of Tourism and Hospitality Management
University of Dhaka

Submission Date: 23 November 2021

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APPLICATION OR USES OF QUQNTITATIVE TECHNIQUE AND
TOOLS IN DECISION MAKING

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Quantitative analysis is the process of collecting and evaluating measurable and verifiable data
such as revenues, market share, and wages in order to understand the behavior and performance
of a business. In the past, business owners and company directors relied heavily on their
experience and instinct when making decisions. However, with data technology, quantitative
analysis is now considered a better approach to making informed decisions. The quantitative
techniques help in decision making process in the way that identifies the factors which influence
the decisions and quantify them. It becomes easier to resolve the complexity of the decision
making. Some of the quantitative techniques such as decision theory and simulation work best in
complex decisions.

What is a quantitative technique?

Quantitative techniques include methods or tools, which focus on objective measurement, and
analyzing numbers in order to draw conclusion about given problems .It is scientific method or
technique used by the business world for problem solving and decision-making. In simple words,
these are bunch of those methods and techniques, which provide us a decision. The study of
Quantitative techniques has been a new concept, which has its wide applications in business and
other fields of life. These are more relevant to problems of complex business situations. These
are supplement to judgment and intuition. Quantitative analysis now extended to several areas,
which are widely designated as, OR, Management sciences, system analysis, decision making
process or decision science and statistical methods etc. Quantitative Technique is a scientific
approach to managerial decision-making. The successful use of Quantitative Technique for
management would help the organization n solving complex problems on time, with greater
accuracy and in the most economical way. Today, scientific management techniques are
available to solve managerial problems and use of these techniques helps managers become
explicit about their problem areas.

Quantitative analysis for business decision making

As your business begins to grow, you will most likely need to make more decisions using staff
input and object data, rather than the personal knowledge of your product; marketplace and
customers that helped you launch and grow. Using quantitative measurement to make finance,

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marketing, production and human resources decions will help you take the guesswork out of
strategic management and give you more confidence as you make your choices.

Quantitative vs. Qualitative

Quantitative data is information you can objectively count, see or rank. Examples include sales
figures, websites traffic statistics, financial reports and employee retention rates. Qualitative data
consists of subjective assessments you make. For example, you can project demand for your
product and future sales using input from your sales people and discussions with customers. You
might use focus groups to test different advertising ideas. A quantitative analysis is an objective
measurement, as opposed to a qualitative analysis, which is a more subjective judgment.

What is quantitative analysis for business?

Business decisions have both tangible and intangible effects on a business, often resulting in
quantity vs. quality trade-offs. In some cases, a strategy you pursue can provide qualitative and
quantitative benefits -- or disadvantages. Understanding both the objective and subjective ways
to look at your operations will help you make better business decisions.

Quantitative Measurements

Analyzing the quantitative performance aspects of a department, product or other area of your
business provides you with hard numbers. For example, if you spend $1,000 on a magazine ad
and it brings you $5,000 in increased business, your quantitative net gain is $4,000. If you
subtract the $500 in costs to create the ad, the return on your investment comes to $3,500. When
you subtract your costs to make and sell that $4,000 worth of product, your net profit might only
be $1,500. This gives you a 50 percent return on your $1,000 investment.

Qualitative Measurements

When you make a decision to pursue a business activity, you make a choice not to pursue
another one. For example, if you purchase a $1,000 magazine ad, that’s $1,000 you can’t spend
on website banner advertising, giving an employee a bonus or reducing debt. If your ad provides
$1,500 worth of profit, but you lose your employee or decrease her loyalty and productivity,

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buying the ad has a negative qualitative impact on your business that might be greater than
$1,500.

Functions of quantitative techniques

The following are the important reasons or Functions of Quantitative techniques

1. To facilitate the decision making process.

2. To provide tools for scientific research.
3. To select an appropriate strategy.
4. To help in reduction of cost.
5. To have proper deployment of resources.
6. To help in minimizing the time required for completing the task.

Quantitative Analysis Techniques

 Regression Analysis.
 Linear Programming. ...
 Data Mining. ...
 Project Management. ...
 Production Planning. ...
 Marketing. ...
 Finance. ...
 Purchase and Inventory.

1. Regression Analysis

Regression analysis is a common technique that is not only employed by business owners but
also by statisticians and economists. It involves using statistical equations to predict or estimate
the impact of one variable on another. For instance, regression analysis can determine how
interest rates affect consumers’ behavior regarding asset investment. One other core application
of regression analysis is establishing the effect of education and work experience on employees’
annual earnings. In the business sector, owners can use regression analysis to determine the

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impact of advertising expenses on business profits. Using this approach, a business owner can
establish a positive or negative correlation between two variables.

Types of Regression Analysis

 Linear Regression Analysis

 Logistic Regression Analysis
 Polynomial Regression Analysis
 Stepwise Regression Analysis
 Ridge Regression Analysis
 Lasso Regression Analysis
 Elastic Net Regression Analysis

Use of regression analysis in market research

A market research survey is conducted with a focus on three major matrices; Customer
Satisfaction, Customer Loyalty, and Customer Advocacy. Remember, although these matrices
tell us about customer health and intentions, they fail to tell us ways of improving the position.
Therefore, an in-depth survey questionnaire intended to ask consumers the reason behind their
dissatisfaction is definitely a way to gain practical insights. However, it has been found that
people often struggle to put forth their motivation or demonization or describing their
satisfaction or dissatisfaction. In addition to that, people always give undue importance to some
rational factors, such as price, packaging, etc. Overall, it acts as a predictive analytic and
forecasting tool in market research.

2. Linear Programming

Most companies occasionally encounter a shortage of resources such as facility space,

production machinery, and labor. In such situations, company managers must find ways to
allocate resources effectively. Linear programming is a quantitative method that determines how
to achieve such an optimal solution. It is also used to determine how a company can make
optimal profits and reduce its operating costs, subject to a given set of constraints, such as labor.

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The word ' Linear' is used to describe the relationship between decision variables are
directly proportional. For example, if doubling (or tripling) the production of a product will
exactly double (or triple) the profit and required resources, then it is linear relationship. The
word 'programming' means planning of activities in a manner that achieves some
'optimal' result with available resources. A programme is 'optimal' if it
maximizes or minimizes some measure or criterion of effectiveness such as profit, This
technique basically helps in maximizing an objective under limited resources. The objective can
be either optimization of a utility or minimization of a disutility. In other words, it helps in
utilizing a resource or constraint to its maximum potential. Managers generally use this
technique only under conditions involving certainty. Hence, it might not be very useful when
circumstances are uncertain or unpredictable.

3. Data Mining

Data mining is a combination of computer programming skills and statistical methods. The
popularity of data mining continues to grow in parallel with the increase in the quantity and size
of available data sets. Data mining techniques are used to evaluate very large sets of data to find
patterns or correlations concealed within them. Data mining is a combination of computer
programming skills and statistical methods. The popularity of data mining continues to grow in
parallel to the increase in the quantity and size of available data sets. Data mining techniques are
used in evaluating very large sets of data, with the aim of finding patterns or correlations
concealed within them. Data mining is not actually a new concept to man it is as old as man’s
existence. It is just that the name it has, and the method of data acquisition was crude in practice
to man over the years. As man shifted from the use of crude tools and a traditional means of data
acquisition, to the advent of technological devices. This had made it possible for the creation of
Data mining tools and software’s in order to get the required data from an existing databank,
mart or warehouse. The subject matter Data mining is a very important tool that has helped in
further creating new ideas and right decision making in business organization, government and
also in the advancement of technology. And a review of how data mining is applied to decision
making is an important focus of this research work.

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Applications of Quantitative Analysis in the Business Sector

Business owners are often forced to make decisions under conditions of uncertainty. Luckily,
quantitative techniques enable them to make the best estimates and thus minimize the risks
associated with a particular decision. Ideally, quantitative models provide company owners with
a better understanding of information to enable them to make the best possible decisions.

Project Management

One area where quantitative analysis is considered an indispensable tool is in project

management. As mentioned earlier, quantitative methods are used to find the best ways of
allocating resources, especially if these resources are scarce. Projects are then scheduled based
on the availability of certain resources.

Production Planning

Quantitative analysis also helps individuals to make informed product-planning decisions. Let’s
say a company finds it challenging to estimate the size and location of a new production facility.
Quantitative analysis can be employed to assess different proposals for costs, timing, and
location. With effective product planning and scheduling, companies will be more able to meet
their customers’ needs while maximizing their profits.

Marketing

Every business needs a proper marketing strategy. However, setting a budget for the marketing
department can be tricky, especially if its objectives are not set. With the right quantitative
method, marketers can easily set the required budget and allocate media purchases. The
decisions can be based on data obtained from marketing campaigns.

Finance

The accounting department of a business also relies heavily on quantitative analysis. Accounting
personnel uses different quantitative data and methods, such as the discounted cash flow model,
to estimate the value of an investment. Products can also be evaluated based on the costs of
producing them and the profits they generate.

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Purchase and Inventory

One of the greatest challenges that businesses face is being able to predict the demand for a
product or service. However, with quantitative techniques, companies can be guided on just how
many materials they need to purchase, the level of inventory to maintain, and the costs they’re
likely to incur when shipping and storing finished goods.

The Bottom Line

Quantitative analysis is the use of mathematical and statistical techniques to assess the
performance of a business. Before the advent of quantitative analysis, many company directors
based their decisions on experience and gut. Business owners can now use quantitative methods
to predict trends, determine the allocation of resources, and manage projects.

Quantitative techniques are also used to evaluate investments. In such a way, organizations can
determine the best assets to invest in and the best time to do so. Some of the quantitative analysis
methods include regression analysis, linear programming, and data mining.

In various surveys of businesses, many indicate that they use decision science techniques, and
most rate the results to be very good.

Role of Quantitative Techniques in Decision Making

Solution for various business problems

With increasing competition and scare resources, how manager can increase the profits of the
organization are some examples of problems faced in today’s business. Quantitative Techniques
help in the field of production, marketing, finance and other activities of business.

Selection of an appropriate strategy

Every business is having a motive to increase its market share from its competitors by observing
the strategies of the others. So game theory comes handy in this situation where businessman can
minimize cost or maximize profit.

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Base for scientific analysis

Quantitative techniques enforce disciplined thinking about organizational problems .They

provide precise description of the cause and effect relationship and risk elimination. Quantitative
techniques replace subjective and intuitive approach with analytical and objective approach.

Reduction in cost and minimizing waiting time

Time is essence in service industry. It is rightly said that a good decision if taken at right time
then outcome of that decision will automatically good. There is gap between service time and
capacity so serve. So queuing theory helps in minimizing waiting time and wastage of resources.
It provides a base for businessman to take a correct and profitable decision.

Proper allocation of resources

Quantitative techniques help in the proper allocation of resources which save time and cost of the
businessman. PERT and CPM is first tool for proper allocation of resources to each and every
activity in a proper manner. These techniques ensure completion of task with in time and with
limited resources. These help managers to plan, schedule and control large and complex projects
so resources wastage can e minimized.

Helpful in inventory management

The inventory management is deal with planning and control of inventory in the organization. If
inventory holds for large time and in large quantity then this idle resource and create losses for
the organization. On the other hand, if there is shortage of inventory then it also negative impacts
on profitability of the organization. So quantitative techniques maintain balance between holding
the inventory or not. These enables management to decide when to buy and how much to buy,

Facilities in decision making

Decision making is an essential part of management process. Thus, the decision maker in the
present business must understand the scientific methodology of making decisions. In real life,
some decision making situations are simple while other are not. The decision is multidimensional
response which includes production, cost quality, price of the product etc. The quantitative
techniques help in decision making process in the way that identifies the factors which influence

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the decisions and quantify them. It becomes easier to resolve the complexity of the decision
making. Some of the quantitative techniques such as decision theory and simulation work best in
complex decisions.

Characteristics of Quantitative Techniques

1) Decision-Making

Decision-making or problem solving constitutes the major working of operations research:

Managerial decision-making is considered to be a general systematic process of operations
research (OR).

2) Scientific Approach

Like any other research, operations research also emphasizes on the overall approach and takes
into account all the significant effects of the system. It understands and evaluates them as a
whole. It takes a scientific approach towards reasoning. It involves the methods defining the
problem, its formulation, testing and analyzing of the results obtained.

3) Objective-Oriented Approach

Operations Research not only takes the overall view of the problem, but also endeavors to arrive
at the best possible (say optimal) solution to the problem in hand. It takes an objective-oriented
approach. To achieve this, it is necessary to have a defined measure of effectiveness which is
based on the goals of the organization. This measure is then used to make a comparison between
alternative solutions to the problem and adopt the best one.

4) Inter-Disciplinary Approach

No approach can be effective, if taken singly. OR is also inter-disciplinary in nature. Problems

are multi-dimensional and approach needs a team work. For example, managerial problems are
affected by economic, sociological, biological, psychological, physical and engineering aspect. A
team that plans to arrive at a solution, to such a problem, needs people who are specialists in
areas such as mathematics, engineering, economics, statistics, management, etc.

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Scope of Quantitative Techniques

The following are the scope of quantitative techniques in different areas:

1) Industry

Industrial management deals with a series of problems, starting right from the purchase of raw
materials till the dispatch of final products. The management is ultimately interested in overall
understanding of the methods, of optimizing profits. Therefore, to take decision on scientific
basis, operations research team has to think about various alternative methods, to produce goods
and obtaining returns in each case.

Not only this, the operations research study should also suggest possible changes in the overall
structure like installation of a new machine or introduction to automation, etc., for optimising the
results. Many industries have gained immensely by applying operations research in various tasks.
For example, operations research can be used in the fields of manufacturing and production,
blending and product mix, inventory management, for forecasting demand, sale and purchase, for
repair and maintenance jobs, for scheduling and sequencing planning, and also for scheduling
and control of projects.

2) Developing Economies

OR is applicable to both developing and developed economies. But a lot of scope exists in
developing economies, for building up an operations research approach towards planning. The
basic idea is to orient the planning, to achieve maximum growth per capital income in minimum
time; considering the goals and restrictions of the country. Poverty and hunger are the core
problems faced by many countries of Asia and Africa. Therefore, people like statisticians,
economists, technicians, administrators, politicians and agriculture experts can work in
conjunction, to solve this problem with an operations research approach.

3) Agriculture Industry

Operations research approach has a huge scope in agriculture sector Population explosion has led
to scarcity of food. Optimum allocation of land for various crops in accordance with climatic
conditions is a challenge for many countries. Also, each developing country is facing the

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problem of optimal distribution of water from several water bodies. These areas of concern hold
a great scope for scientific research.

4) Organization

Organization, big or small, can adopt operations research approach effectively. Operational
productivity of organizations has improved by using quantitative techniques. Techniques of
operations research can be applied to minimize cost, and maximize benefit for decisions. For
example, a departmental store faces problem like, employing additional sales girls, or purchasing
an additional van, etc.

5) Business and Society

Businesses and society can directly be benefited from operations research. For example,
hospitals, clinics etc. Operations research methods can be applied directly to solve administrative
problems such as minimizing the waiting time of outdoor patients.

Similarly, the business of transport can also be benefited by applying simulation methods. Such
methods can help to regulate train arrivals and their running timings. Queuing theory can be
applied to minimize congestion and passengers waiting time.

These methods are increasingly being applied in L.I.C. workplaces. It helps in deciding the
premium rates of various policies. Industries such as petroleum, paper, chemical, metal
processing, aircraft, rubber, mining and textile have been extremely benefited by its use.

Nature of Quantitative Techniques

1) Quality of Solution

Quantitative techniques help in improving the quality of solution but may not necessarily result
in a perfect solution. It helps to find the best possible solution to the problem under
consideration.

2) Goal-Oriented Optimum Solution

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Quantitative techniques are sensitive about the optimization theory. It aims at identify the best
possible course of action or solution under given constraints.

3) Use of Models

Quantitative techniques uses models built by quantitative measurement, it also derives a solution
from the model using one or more of the diversified mathematical techniques. A decision can be
arrived, either by conducting experiments on it or by mathematical analysis. The objective is to
assess the organization to determine its policy, and actions scientifically and optimize its results.

4) Require Willing Executives

Quantitative techniques need a group of individuals having diverse backgrounds and skills to
evaluate and analyze the costs, pros and cons of the alternative solutions of the problem.
Willingness to participate in such experimental process is must for the executives. This will
empower the decision-makers, to be objective in selecting the best possible solution.

5) Reduces Complexity

Quantitative techniques attempt to minimize the complexity of business operation by helping

managers to correct a difficult function or process. It also attempts to innovate easy solutions of
costly and complicated functions, compared to actual experimental practice.

Importance of Decision Science / Quantitative Techniques

1) Better Control

For large organizations, it is practically impossible to continuously supervise every routine work.
A QT approach comes handy and gives an analytical and quantitative basis to identify the
problem area. QT approach is most frequently adopted with production scheduling and inventory
replenishment.

2) Better Systems

For example, Problems identifying the best location for factories or decision on whether to open
a new warehouse, etc., are often been studied and analyzed by QT approach. This approach helps

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to improve the existing system such as, selecting economical means of transportation, production
scheduling, job sequencing, or replacing old machinery.

3) Better Decisions

QT models help in improved decision-making and thereby reduce the risk of wrong decisions.
QT approach gives the executive an improved insight into the problem and thereby improves
decision-making.

4) Better Co-ordination

QT models help in co-ordination of different or various divisions of an organization.

Limitations of Quantitative Techniques

1) Dependence on an Electronic Computer

QT approach is mathematical in nature. QT techniques try to find out an optimal solution to a

problem, by taking all the factors into consideration. The need of computers become unavoidable
because these factors are enormous (huge), it requires huge calculations to express them in
quantity and to establish relationships among them.

2) Non-Quantifiable Factors

One of the drawbacks of QT techniques is that they provide a solution only when all the
elements related to a problem are quantified. Since all relevant variables may not be quantified,
they do not find a place in QT models.

3) Wrong Estimation

Certain assumptions and estimates are made for assigning quantitative values to factors involved
in QT, so that a quantitative analysis can be done. If such estimates are wrong. The result can be
misleading.

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4) Involves Time and Cost

Operations research is a costly affair. An organization needs to invest time, money and effort
into QT to make it effective. Professionals need to be hired to conduct constant research. For
better research outcomes, these professionals must constantly review the rapidly changing
business scenarios.

5) Implementation

The complexities of human relations and behavior must be taken into account while
implementing QT decisions, as it is a very delicate task.

Applications of Quantitative Techniques

Uses, scope and applications of quantitative techniques in managerial decision-making are as

follows:

Applications of Quantitative Techniques

1) Finance, Budgeting and Investment

 Long range capital requirements, cash flow analysis, investment portfolios and dividend
policies.
 Credit policies, credit risks and procedures for delinquent account.
 Procedures to deal with complaints and claim.

2) Marketing

 Selection of product, its timing and competitive actions.

 Cost and time-based decision for advertising media.
 Rate of calling an account and requirement of number of salesmen, etc.
 Market research effectiveness.

3) Physical Distribution

 Size of warehouses, distribution centre, retail outlets, etc., and their location.

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  Policy for distribution.

4) Purchasing, Procurement and Exploration

 Buying rules.
 Determining purchase timing and its quantity.
 Policies for bidding and analysis of vendor.
 Replacement policies of equipment.

5) Personnel

 Manpower requirement forecasting, recruitment policies and assignment of job.

 Suitable personnel selection considering age and skills, etc.
 For each service centre determining the optimum number of persons.

6) Production

 Proper allocation of machines for scheduling and sequencing the production.

 Optimum product mix calculation.
 Selecting production plant sites along with its location and design.

7) Research and Development

 Alternative designs evaluation and its reliability.

 Developed projects control.
 Multiple research projects co-ordination.
 Required determination of time and cost.

Conclusion:

Using quantitative methods and tools in Human Resource is a great way to use data gathered
through trend analysis, and case studies to ensure a stronger foundation within your organization
through a deeper understanding of strengths and weaknesses. So, we can say quantitative
research or analysis is very important for any business organization at this moment.

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