Applying decision tree in food industry – a case study

Managers Naked Necessities LTD has to make a decision as to whether the company should open a café selling hot food, or just cold snacks. The company also has the option to carry on trading as it is and not open a café. When faced with a decision such as this, the management should first identify whether the decision to be made is a qualitative or quantitate decision. This will influence the tools and models that should be used to make the decision. This is a financial decision and concerns numerical data, therefore a quantitative approach is advised. A decision tree can be a clear way to represent complex data in a simple graphical form. The calculations involved can be used to create scenarios and outcomes of the decision. If clear objectives of the decision have been established by the management, the decision making process can me made relatively simple by using a decision tree. The management should be advised that one of the main criticisms of the decision tree model is that it is prone to bias during the probability phase of the model. Managers should be aware of this issue. Literature suggests that as much historical, numerical data should be ascertained as possible to put into the calculations. The literature suggests that by using more numerical data, it will increase the validity of the results of the model.