Decision Analysis: Application & Benefits

Decision Analysis: Application & Benefits

Decision analysis has emerged as a valuable tool for assessing risk, making investment decisions, and optimising corporate performance. Decision analysis can help businesses evaluate different options and make informed decisions by using various decision-making tools like value calculations, decision trees, and research. 

Using decision analysis, CMAs provide insights into a company’s marketing or management decisions or strategic planning., Regardless of their size or sector, businesses use this technique for enhanced decision-making. Thus, it isn’t surprising that the CMA USA course has included this topic in its curriculum deeming it an important aspect of a CMA’s job role. 

This article will discuss decision analysis in more detail. Dive in to learn more!

What do you mean by decision analysis?

The process of evaluating essential decisions for a business with the help of different decision-making tools is known as decision analysis. This method is highly systematic and computable. The term decision analysis was first coined in 1964 by Professor Ronald A. Howard, a faculty member of Standford University. 

Both large and small businesses have adopted this technique to take effective decisions regarding risk management, investment, marketing, cost management, etc. The various approaches used by decision analysis to make accurate and better decisions are:

  • Visual Approach
  • Systematic Approach
  • Quantitative Approach

How are decision analysis techniques applied while taking essential decisions?

Listed below are the steps that a company should take while using decision analysis techniques:

  • Identifying the issue

The initial phase of a decision analysis process involves identifying the issue that needs to be resolved. Subsequently, companies use various decision analysis tools  to spot the issue. After spotting the issue, the company has to look for probable solutions. 

  • Searching for the available options

The next step is the research phase. The company researches the options available to solve the issue. Companies gather data from the conducted research to assist them in laying out their decision. This phase also shows the potential outcomes of a decision. 

  • Development of a framework

The development of a framework is necessary to evaluate the final result. To build a framework, a company needs to set up KPIs. KPI is a form of measurement that helps trace the progress of various goals set by the company. This measurement by KPI can be either quantitative or qualitative. 

  • Creation of a suitable decision model

After developing a framework, it is necessary to make a decision model. This is because, with the help of a decision model, a framework can operate and illustrate various options. 

  • Outcome

After the completion of the entire model, it is necessary to check the predicted value before zeroing in on the final decision. 

Application of decision analysis in real life

Here are a few real-life applications of decision analysis:

  • Real Estate

Decision analysis is commonly used in the real estate sector. For example, a company is planning to build a shopping complex at a particular location. However, before the construction begins, the builder has to consider several conditions like location, traffic, demographic population, local competition, etc. These are a few important factors that will decide the shopping mall's success at that location. 

Hence, the company can use decision analysis to examine all these factors and finally arrive at an appropriate decision. 

  • Product Launch

Product launch is another field where decision analysis is widely used. With the help of a decision tree, a company can decide how to build the product, how to promote its use, and even predict when it will be outmoded. The last part can prevent the company from incurring losses and plan ahead as to the steps to improve upon it and keep it in demand in sync with changing customer needs.

Different benefits of opting for decision analysis

There are various benefits of adopting decision analysis. These benefits have been discussed below:

  1. A venture can take a better decision by deeply comprehending and analysing every respect of the issue. 
  2. Decision analysis also helps ventures predict and compute the results of the decision they are considering. This assists them in making the right and the most suitable decision for themselves.
  3. Decision analysis also allows a venture to take responsible and rapid decisions. It enhances the quality of the decisions that a company is willing to make. 


Decision analysis is a significant tool in operating businesses in the current scenario. It helps them solve many complications, from complex long-term issues to simple daily ones. You can learn more about this with a CMA course.

The Certified Management Accountant course offered by Imarticus is perfect for prospective CMAs. This course covers everything from corporate finance, financial statement analysis, and accounting to cost management. This online course taught by experienced faculties will help you ace your CMA exam. Enrol in the course without further delay and bag alluring placements and opportunities today! 

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