Action Learning Project
Managers often need to make decisions in challenging situations and with references to the ideas of managerial economics. In this case, it is possible to succeed in developing an effective solution to a problem while focusing on a six-step decision-making model (McGuigan, Moyer & Harris 2013, p. 24).
The purpose of this paper is to describe the situation related to the development of the stickK.com website, to analyze the problem referring to the six-step decision-making model, and to provide the rationale for the decision.
Description of the Chosen Problem
In 2010, Jordan Goldberg, known as the CEO of the stickK.com website and service, faced a problem of selecting the further strategy for a company that helps customers reach their goals and commit to their plans individually (John, Norton & Norris 2015, p. 1).
However, after the experience of working according to the B2B model and creating products for Staples and the American Cancer Society, Goldberg received a variety of propositions to create platforms and provide software for organizations that need to motivate their employees (John et al. 2015, p. 8-9). The problem is in the fact that stickK.com is a start-up company, and it needs more revenues for its development with the focus on reducing costs.
Following the B2C model, Goldberg can achieve financial goals slowly (John et al. 2015, p. 9). However, focusing on the B2B model, the company can change its mission of studying individuals’ behaviors and assisting them in improving their life. In this context, Goldberg needed to make a decision that could be both profitable and correlated with the organization’s mission and primary goals.
Analysis of the Problem
The sex-step decision-making model that is used in managerial economics includes the following stages: problem definition; determination of an objective; exploration of alternatives; prediction of consequences; making a choice; and a sensitivity analysis (Samuelson & Marks 2011, p. 6). The detailed analysis of the problem according to this model is necessary to conclude with an appropriate decision.
Step 1
Focusing on the first step of defining a problem, it is possible to state that Goldberg effectively defined the issue requiring a solution. The reason is that the CEO clearly determined the main aspects of the problem: profitability of the business model in relation to the provision of revenues; costs associated with following the previous model or implementing a new one; and correlation with behavioral economic principles (Froeb et al., 2015; Samuelson & Marks 2011, p. 7). Thus, Goldberg defined a problem with references to the features that need to be monitored and evaluated properly to make a reasonable decision.
Step 2
The aspects determined during the problem definition stage can also serve as objectives for the decision-making process. Thus, Goldberg has three main objectives that are to maximize profits, to minimize costs, and to serve customers’ interests. This stage is completed by the CEO successfully (Samuelson & Marks 2011). Still, while focusing one only one business model, Goldberg faces a risk of compromising one or two set objectives. However, the focus on risks is typical for this stage of the decision-making process.
Step 3
Goldberg has three alternative paths to follow while adopting a business model. Goldberg succeeded in determining such alternatives as the focus on the B2C model, the choice of the B2B model, and the focus on both models simultaneously (John et al. 2015; Samuelson & Marks 2011). The strengths and weaknesses of alternatives were also determined, depending on the set objectives.
Step 4
In order to make a right decision, Goldberg needs to pay more attention to predicting consequences of alternatives (John et al. 2015). In case of selecting the business model, it is necessary to make calculations regarding the expected revenues, costs, and timeframes associated with following each alternative (Samuelson & Marks 2011).
Step 5
Referring to the data of 2012, it is possible to state that Goldberg made the most appropriate choice and focused on following two business models. To make an efficient choice is a significant task for a leader, and he needs to refer to the managerial and economic analyses of the previous and current experiences with the focus on alternatives to value all strengths and weaknesses (Hsu et al. 2012, p. 1356; Samuelson & Marks 2011). The choice of the alternative uniting the features of both strategic directions is appropriate for minimizing risks and maximizing profits in a start-up company.
Step 6
Sensitivity analysis is an important stage of the decision-making process because it is necessary for the CEO to learn how economic factors and the aspects of the market development can influence the effectiveness of the made decision.
At this stage, Goldberg needed to assess how changes in the website popularity and customers’ interests could influence the rate of registration and making stakes in order to increase revenues of the company (Samuelson & Marks 2011). Furthermore, it was also important to understand how changes in the interest of corporate clients in products of StickK could influence profits if Goldberg chooses only the B2B business model.
Rationale behind the Decision
Having evaluated available alternatives, it is possible to state that the most reasonable decision to address the problem is the adoption and implementation of two business models in order to serve both individuals and organizations. The decision made by Goldberg can be discussed as efficient and mostly supported by the principles of the six-step decision-making model.
The reason is that, promoting the B2C and B2B models, the CEO is able to contribute to the economic progress of the stickK.com website, while maximizing profits through inviting individual clients and organizations to use the company’s services. Furthermore, the financial analysis demonstrates that focusing on two alternative models, businesses can minimize risks associated with different strategies and cover costs of non-profitable projects investing revenues received from economically successful projects and initiatives (Samuelson & Marks 2011).
In this case, the decision made with the help of the six-step model should be based on the thorough analysis of economic and business advantages and disadvantages of selecting this or that course of actions (Bentzen, Christiansen & Varnes 2011, p. 330). From this point, much attention should be paid to performing a sensitivity analysis.
While concentrating on Goldberg’s decision regarding the strategic and business course for the stickK.com website, it is possible to state that the sensitivity analysis after completing projects for Staples and the American Cancer Society plays the key role in choosing the best alternative among available ones.
Thus, the efficient decision to serve both private and corporate clients depends on the careful decision-making made by Goldberg with the focus on such steps as the determination of objectives, prediction of consequences, choice, and sensitivity analysis.
Conclusion
The six-step decision-making model is a useful tool to be utilized by managers in order to decide in complex situations and find the most appropriate solutions to a variety of identified problems. Much attention should be paid to the careful analysis of the situation with references to the context at each stage of the decision-making process.
These steps are helpful to evaluate the situation and alternatives, and analyze them from many perspectives to make the most relevant choice in the concrete situation without compromising needs and interests.
Reference List
Bentzen, E, Christiansen, JK & Varnes, C 2011, ‘What attracts decision makers’ attention? Managerial allocation of time at product development portfolio meetings’, Management Decision, vol. 49, no. 3, pp. 330-349.
Froeb, L, McCann, B, Ward, M & Shor, M 2015, Managerial economics, Cengage Learning, New York.
Hsu, WK, Tseng, CP, Chiang, WL & Chen, C 2012, ‘Risk and uncertainty analysis in the planning stages of a risk decision-making process’, Natural Hazards, vol. 61, no. 3, pp. 1355-1365.
John, L, Norton, M & Norris, M 2015, ‘Making stickK stick: the business of behavioral economics’, Harvard Business School, vol. 2, no. 2, pp. 1-15.
McGuigan, J, Moyer, RC & Harris, F 2013, Managerial economics: applications, strategies and tactics, Cengage Learning, New York.
Samuelson, W & Marks, S 2011, Managerial economics, Wiley, New York.