Abstract:

Company management is often faced with the problem of choosing between strategies with a multitude of consequences whose overall effects are difficult to assess. The manager is liable to overestimate the importance of some factors of which experience or temperament have rendered him more aware, and to neglect others, thereby being prompted to make the wrong choice. This risk can be diminished by the use of strategy models which express the relative profitability of various options in terms of parameters, the latter being less difficult to assess or else easily measured by surveys. Our point of departure is a simple example of a model as applied to a proposed joint marketing venture between two competitor firms which will be followed by an outline of the wider implications. First, we shall present our example; next, we shall describe how the model was built; and finally, we shall show how the model was used to arrive at a decision.