Transcript Variables
Resource Allocation and Negotiation Problems 1 Resource allocation models 2 Variables are areas to which resources might be directed –e.g. products, projects, regions or departments A package is a combination of strategies –containing one strategy for each variable 3 Stages in building a resource allocation model 1. Identify variables, resources to be directed and objectives 2. Identify possible strategies available for each variable 3. For each variable assess costs and benefits of each strategy (continued... 4 Stages in building a resource allocation model (contd) 4. Assess within-criterion weights so that each benefit can be measured on a common scale 5. Assess across-criteria weights to compare ‘importance’ of different benefits 6. Propose a package that appears to achieve objectives (continued... 5 Stages in building a resource allocation model (contd) 7. Use a computer to identify costs and benefits of all packages and the efficient frontier 8. Use the computer to find if there are more efficient packages than the proposed package 9. Perform sensitivity analysis 6 English Furniture Company Region No. of Comments outlets North 9 30% of national sales here, but economically depressed West 3 Stiff competition East South 2 Potential growth area 14 Planning restrictions on new outlets 7 • • • • Planning strategy for next 5 years Variables = 4 regions Resource to be assigned = money Objectives: 1. Sustain profitability in short term (PROFIT) 2. Increase market share (MKT SHARE) 3. Minimize risk (RISK) 8 Identifying strategies for each region 9 Costs and benefits of strategies in individual regions 10 Comparison of East & West’s scales for market share 11 Within-criterion weights: Profit 12 Within-criterion weights: Market share 13 Within-criterion weights: Risk 14 Value of strategies with benefits measured on common scale 15 Across-criteria weights 16 Identifying the efficient frontier 17 Investigating costs and benefits in the West region 18 Investigating costs and benefits in the East region 19 Investigating costs and benefits in the South region 20 Negotiation models 21 Characteristics of negotiation problems • • • • • • No. of parties: two or more than two? Monolithic or non-monolithic parties? No. of issues: one or more than one? Time constraints? Final agreement binding? Third party intervention possible? 22 • We consider negotiations involving -two parties -several issues Objective: To find deals which are beneficial to both parties 23 Illustrative problem • Management v. Union negotiations • Union demand: * 15% pay rise * 3 extra days’ holiday per year * reinstatement of workers sacked after breach of regulations 24 Efficient frontier If a deal is on the efficient frontier any improvement for one party can only be achieved at the expense of the other party This is known as Pareto optimality 25 Values and weights for pay rise 26 Values and weights for holidays 27 Values and weights for reinstatement 28 Value of tentative deal to management and union 29 Identifying the efficient frontier 30 Reported advantages of applying decision analysis to negotiations • Creative attitude in negotiations • Negotiators could prepare in advance and anticipate position of other party • Clearer understanding of problem and increased flexibility • Improved communication within negotiation team 31