Decision-Making Case for SMEs

Decision Making

Decision-Making Case for SMEs

The decision-Making analysis is one of my favorite topics in my MBA. This analysis applicable to SMEs relied on Kepner-Tregoe Approach as the basic rational process. First of all, I send my greeting to everyone. Hello 2021, I wish the world will heal immediately and our life full of joy and happiness.

This January is the last semester for my MBA, I feel nervous to do my thesis. The previous semester gave me a lot of new insight into the business, especially for the level strategic. I was a little bit confused to learn about the courses, the decision-making, and negotiation course was the hard one. But at the end of the semester I enthusiastic about that course. We should take decisions based on various points of view and should in line with the purpose of the problem solving itself. Here is an example of the decision-making flow and analysis from my small business.

Decision-Making Case Problem Situation

Dontfitjustbe is a new fashion brand that focuses on daily wear while spreading mental health awareness. Two weeks ago, October 25, 2020, dontfitjustbe launched the first collection as the minimum viable product to test the market. The brand was founded by me, Septi Saraswati. Due to the COVID-19, the business activities were restricted, the owner should do the business from home, except for the production process. The launching is supposed to be done in early September but there was a problem with production. The communication between the owner and the vendor is the biggest problem. The vendor visit activities are limited to the COVID-19 situation, so the coordination is mostly done by telephone.

The vendors complete the production by partial progress. When the owner received half of the product, there was an asymmetric screen printing on the product. The owner could not take any action because it was half of the total quantity likewise the error is not too visible. The vendor asked for additional cost because they think there was a miscommunication on the screen printing design.

Donfitjustbe has two main focuses on the customer journey strategy. The first is to make sales while the customer feels engaged with the brand’s mission. The second is to build the community on mental health awareness. The customer can participate by involved in the interaction and submit their insight about it. The customer journey strategy is to build the brand website that focused on audience or customer engagement and make an interactive Instagram account with a specific brand persona. All of the strategy doing by the owner herself.

The Current Issue

Currently, the owner found the problem that the audience who engage with the brand is not the target market. The impact is the price of the product is not match the audience willing to pay. The marketing strategy is not optimized due to the budget cost and human resource capability limitation. There are options to overcome this problem, the first is a change marketing strategy by transferring it to a third party such as a product photographer and make an endorsement to an Instagram influencer. So the owner can be focused on specific activities. Consequently, this alternative would have resulted in a higher cost.

About the Brand

As mentioned before, the brand’s mission is to make awareness about mental health through fashion. The owner realized that mental health is still a “taboo” thing because of people afraid of the stigma. On the other side, many people start to realize that their mental health is a very important thing, but they still won’t speak about it. Dontfitjustbe wants to make a solution by encouraging people to spread awareness and not afraid to mind their mental health. After two weeks of launching, the market shows a positive response but the owner still attempted the market interest to be sales action.

The owner has a strategy to accelerate brand awareness by making collaborating with the mental health activist or influence. The business activities are going to slow progress because the owner has no team yet. While doing the business, the owner still has another concern, her master’s degree course activity and she focused on her two years old son. Because of the COVID-19, the owner decides not to employ a household assistant because of the COVID-19 spread risk. So time management is one of the important things that could be mainly focused on the owner to run the business. The business should run consistently, or the brand will be lost the market share. Moreover, there are new competitors, new brand fashion that has the same focus as the dontfitjustbe, speak up about mental health, maybe the target market is different, but dontfitjustbe would be lost on the competition.

To keep the pace of the business growth, the owner has 2 strategy options to overcome the marketing problem. The first is to increase the marketing budget which initially IDR 2 million to IDR 3 million. This strategy to enhance customer conversion and reach a specific target market. The second is to keep the current budget and optimize marketing without third-party intervention. The reason is the limitation of business capital, so the owner should optimize marketing with the available budget.

Lack of Marketing Strategy

For the increased marketing budget option, the owner should decide whether to do marketing by herself such as boost the online ads with a cost amounted IDR 2.600.000 or held the giveaway event with a budget cost of IDR 400.000. The probability rate of self worked strategy will be taken by the owner is 40% and 60% respectively.

The other option is to engage with the third party such as collaboration with an influencer with cost IDR 3.000.000, hand over the product photoshoot to the vendor photography with cost IDR 3.000.000, and make endorsement with cost IDR 1.500.000. The probability rate that this 3rd party strategy will be taken by the owner is 50%, 20%, and 30% respectively. If the owner chooses to keep the current marketing budget option, the owner has two planning strategies.

The first is to optimize online ads with cost IDR 2.000.000 and held give away event with cost IDR 400.000. The probability rate of the 3rd party strategy will be taken by the owner is 50% for each strategy. Based on the owner’s experience there are expected sales that will result from each strategy. Here is the detail :

Decision-Making

Analysis

Decision-Making Situation Appraisal

To overcome the problems, I analyze the causes of the problem, how to prioritize it, decision-making strategy, and know the probable impact of these problems. The first step is Situation Appraisal (SA), which summarizes all of the problems to break apart if there is an overlapping issue and then identify the level of urgency, the trend, and impact on the business. This summary helps me to decide what method should be applied to each problem and what problem should be my priority.

Situation Appraisal Table

Based on the table, my focus is to overcome the time management and marketing strategy problem. Because there is a lot of tasks to do to build the business, I should make a decision on how to hand over the task that I’m not too capable of and the task that I should focus on based on my capability. I concern about marketing seeing is not my specialty. Time management and marketing strategy are urgent to be solved to reach the target market. If I failed to do this in the first place, maybe my business will grow slowly or maybe will lose the market share. Furthermore, I will explain the problem analysis following the analysis method that I have decided on the Situation Appraisal Table.

Decision-Making Problem Analysis

After launched the first collection, I try various marketing strategies such as Instagram ads, Twitter trending topics to get the audience and share the product launch announcement on my personal Instagram. The result is the audience response, the interaction on Instagram content is high. Even there is a lot of audiences that convey their enthusiasm for the dontfitjustbe brand concept and mission.

But there is no sales conversion from the dontfitjustbe audience, the purchase transaction just came from my friends in other words they came from my personal Instagram. Almost all audience that has interaction with the brand is not fully dontfitjustbe target market. The age range, their activities, and the audience income category are not meet the target market criteria. Here is my analysis of the unknown problems with the Kepner-Tregoe Problem Analysis (PA) method :

Kepner-Tregoe Problem Analysis

Develop Alternatives by Tree Decision Analysis

On the situation appraisal stage, I found that the time management and unoptimized marketing strategy is urgency problem, it can give a high impact on the business if I’m not solved the problem in the first place. If we go back to the Problem Analysis, the most possible causes of low sales conversion are marketing strategy execution and marketing budget. Budget limitation exposes me to do every business task by myself. So I have lack time management to run my business and not perform optimal marketing strategy due to my capability limitation.

To overcome this problem I have to decide whether to keep the current marketing budget or increase the marketing budget by adding some of my personal savings to increase the business capital. To analyze which marketing decision I should take. I do a decision tree analysis that focused on possible cost and expected sales options (stated in the situation section).

Decision Tree Analysis

Decision Tree
Marketing Decision Tree

The marketing decision tree run on the silverdecision software with two criteria, the cost (C) and expected sales (I) and rule min-max. The result is I should prefer to take increasing marketing budget options and optimize the budget to involve the third party in marketing strategy. By increase the marketing budget, dontfitjustbe will have expected sales amounted to IDR 8.910.000 with the minimum cost of IDR 2.550.000 (the blue line).

I calculate the expected sales based on the price of the product and the sales transaction frequency assumption. If I take this decision, the time management problem will be solved in line with the reduction in marketing tasks. The marketing strategy will result in more sales conversion due to marketing execution that reaches the right target market. The sales conversion will be faster rather than I do the marketing strategy without third party involvement.

Read : Knowledge Management for Start-Up

Potential Problem Analysis

In the situation appraisal stage, I found the defective product from the production process. It is related to the lack of product quality control and lack of coordination with the vendor. For now, the problem has no significant impact because the defective product still in the tolerance number. For the business in the future, it will create a negative impact. If I do not prevent this problem to happen, it will result in a higher cost of production, production time schedules, and profit decreasing due to loss of customer satisfaction. The other problem that I found is the sales channel that makes a bad customer journey. So here my analysis to anticipate  future events that might be rise from the current problem :

Potential Problem Analysis

Conclusion

To grow the business (dontfitjustbe) I should formulate a strategy in line with the dontfitjustbe value, mission, and vision. In the business execution, the decision-making should be based on the data and the probability event analysis not only based on the assumption. This systematic model of decision-making process helps me to more rational and accurate on the taking decision. The problem with my current business is marketing and time management. So all these of the decision-making analysis methods, I can choose the optimal decision to execute my strategy. I could consider any other factors besides the cost, such as my capability and external factors, that might affect the business.

Please follow and like us:
MBA-Entrepreneurship Student Coffee addict, Analyst, try to be human Reach me at saraswatisepti@gmail.com Lets share our stories

Leave a Reply

Your email address will not be published. Required fields are marked *

Back To Top
Translate »