Understanding Decision Trees in Business

What is one of the main advantages of using decision trees in decision-making?

• They eliminate the need for qualitative analysis.

• They force managers to analyse different possible options and opportunity costs.

• They guarantee accurate predictions of future outcomes.

• They are only useful for new market scenarios.

Which of the following is a potential drawback of decision trees?

• They always provide accurate estimates.

• They can be prone to managerial bias.

• They are only useful for qualitative data.

• They are not suitable for any business decisions.

How can decision trees be particularly useful for businesses like Apple?

• They allow businesses to ignore past data.

• They help in making decisions based on scenarios encountered in the past.

• They ensure that all decisions are made without any data.

• They are only useful for launching new products.

What is a key term associated with decision trees that is important for examinations?

• Sunk cost

• Opportunity cost

• Fixed cost

• Variable cost

Why might decision trees be less useful in new market scenarios?

• They are only designed for qualitative analysis.

• They rely on historical data which may not exist for new markets.

• They are too complex for new markets.

• They provide too much qualitative information.

What is a criticism of decision trees regarding the accuracy of estimates?

• They always provide accurate estimates.

• The accuracy of estimates can be affected by changes in the external environment.

• They do not require any estimates.

• They are only accurate for short-term decisions.

What should businesses avoid when using decision trees?

• Using them in combination with other decision-making tools.

• Relying solely on decision trees without considering qualitative factors.

• Using them for decisions based on past scenarios.

• Incorporating quantitative data into the decision-making process.

Which of the following is a benefit of injecting quantitative analysis into decision-making?

• It eliminates the need for any data.

• It supports decisions with data rather than just opinions.

• It ensures that all decisions are made without any analysis.

• It only considers the opinions of managers.

What is a recommended approach when using decision trees for strategic decisions?

• Use decision trees in isolation.

• Combine decision trees with a range of quantitative and qualitative sources.

• Avoid using any quantitative data.

• Only use decision trees for short-term decisions.

What is a potential issue if qualitative factors are sidelined in decision-making?

• It ensures that all decisions are made accurately.

• It can lead to difficulties as important qualitative factors are ignored.

• It guarantees that all decisions are based on data.

• It simplifies the decision-making process.