Decision tree is one of the quantitative methods of decision maki central decision creates a number of sub-decisions which, in turn, may in many alternatives. Business managers have to select best of these alternatives short, decision tree is a method used to choose best or most profitable ca available alternatives. Definition : It is a quantitative method of decision making. It makesit possible to see a large number of decisions arising out of the main decision, 4rs reveals various alternatives enabling managers to make -aecisio gt ‘native from among them, nie best al : i: oF pods, decision tree analysis ia systematic protayal of future acts snot evens (consequences) in an organised form directly connected isos) «ofa problem having Sequential outcomes over a period af ime a i ‘method is known as decision tree because just as several branches ne main trunk of a tre, similarly a major business decision itself 3 8 rp aumnber of decisions, cach one of them having several altematives, tat panches of tee ate never uniform in tenn of mumber of leaves and sear tiem, alternative business decisions camry different possibilities of Wer losses, An imaginary decision tee may be portrayed on a graph A is pe ean be represented ether vertically or horizontal, ‘Characteristics : The main characteristics ofa decision tree areas follovs ({)_ Several alternatives emerge out of a main business decision, @)_ Different alternatives arising out of implementing of the main decisions are presented in tabular form, (6). The final result in its monetary terms in presented for each of these alternatives (The choice is made after a careful consideration ofthe result and after a > systematic comparison ofthe alternatives as well. (9) The probability theory is employed for decision making. (6 As the result of each decision, some events occur which are depicted in the decision tee, ()_ Itisa graphical presentation. Advantages of Decision Tree : Advantages or utility of decision tree can be tioned as under : (1) Best Decision : In the method of decision tree after determining different lative and comparing them, proper alternative is selected. Hence proper and mal decision can be taken on any matter. (2) Knowledge about alternative courses : On the basis of decision tree, ible to know how many and which type ofaltemative courses ae available, so they ean be evaluated and best alternative can be selected. (9) Idea about risk : On the basis of it, it is possible to know the risk and ities arising from adopting different alternatives. This helps to avoid the alternative, (4) Forecast of financi Sented in this met Mained, This hel Say finance, ial requirements : Financial results ofeach alternative thod, so that quantum of financial requirements can be ps in considering various financial sources for raising SG (Seme-1) Modern Business Practices —6 [50] AGIBCStructure for the discussion of complex problems and their solutions. Discuss, regarding different alternatives ean be made with different officers and employe Their co-operation and support ean be obtained if their proper and rey suggestions are accepted, (©) Knowledge of probable results In decision tree future probable even, become clear so that it is possible to know the probable results of any decision (7) Optimum use of resources : Under this method, best alternative 4 selected from different alternatives. Hence it becomes possible to make o Use of financial and other resources. (8) Useful method : This method is most useful for effective planning foray type of activity, as different alternatives are examined for the solution of problem Hence managerial personnel develop special skill in analysing problems ay examine different alternatives. Pim Limitations of Decision Tree : Limitations or disadv: may be stated as follows : () Under this method, for findin; data & for classific knowledge are re business units c: antages of this metho, 8 different alternatives, for collecting necesay ation and analysis, persons with specialised and exper ‘quired. Hence this method becomes expensive, Small ‘annot afford to adopt this method. @ Inactual Practice, sometimes comples and difficult problems arise, Itis difficult to present such pI roblems by way of decision tree. @)_ As this method requires determi, analysing them ete, much tim decisions cannot be taken, ining different alternatives, collecting dat, is consumed, Hence sometimes prompt @) This method is based on probability or estimates. If these estimates o Probability do not tum out to be true, then decisions taken may be wrong or unwise and there may be possibility of changing them in future This method suggests, alternative solutions regarding different problems But it does not mention the best solution of problems. The solution has o be found out by managers. If they make a mistake, it is possible that it may lead to failure. In spite of these limitations, itis one of the best methods of decision-making available to management. ©)