I worked as a part-time interpreter in a Company C, a Chinese chemistry company. At that time, Company C decided to buy some machines from other companies; after information research, it had two options. The first option was Company A, a good company from Europe, without manufacturing base and representative office in China. The second option was Company B, a joint venture established in China, with manufacturing bases and bilingual professional engineers in China. The technology of Company A was a little better than that of Company B, and Company C’s finial choice was Company A. Then Company A sent the experts from Europe to guide the installation and commissioning on site, and Company C hired me for interpretation. However, due to big quality problems of the components, Company C sent more engineers from Europe to repair and sent back some components to the plant in Europe. The component problems resulted in the temporary production halt due to few spares; Company C could not deliver products to contractors, causing great economic loss. The purpose of this report is to analyze the decision making process of Company C and the way such decisions could have been improved based on theories.
2.0 Analysis of decision making process
In this part, the decision making process of Company C will be analyzed in accordance with six theories. First of all, this decision is made based on the bounded rational model, and the decision maker admits there are restricted conditions with impact on the decision. The decision maker does not pursue the optimal result, but tries to look for something good enough. In reality, there is no perfect opinion; if the second-best option exists, the decision maker can select it. In our case, the best company to be selected in theory should be a company with great technology and production base in China. However, according to the market research made by Company C, this kind of ideal company does not exist. In fact, Company A, with better technology, is able to make products with greater purity than Company B. But Company B has its own production bases in China, and the repair costs is be lower than that of Company A in Europe. Besides, Company B has Chinese professionals, and Company C does not need to pay additional interpretation expense for communication. Company A, on the contrary, has better technology and has no production base in China. The decision maker finally selects Company A after comparison because the decision maker concerns more about product purity. Secondly, the risk analysis is carried out, for a company always faces risks in decision making. In our case, during the decision-making process, the decision maker of Company C pays a lot of attention to the purity of products. In the market, the supply of pure products is less than the demand; there are few companies in China which can make such pure products. The price of pure products is quite high in the market, and the profit is pretty large. The decision maker deems that choosing Company A will have higher expected return, and does not consider carefully about risks of repair cost. Company C optimally thinks that there will be few components which need to be repaired in the future. The idea of the decision maker is that the return can be sufficient enough to offset the risk. However, the truth is there are big problems of the compartments, and many of them need to be transported back to Europe to repair. Although Company Agrees to pay for the transportation fees and repair them for free, the great loss has been caused for Company C. Company C fails to deliver products according to contracts due to the production halt caused by compartment problems, and makes compensations to the demand companies.
Thirdly, the decision is made on the basis of 8 step decision making model, and it is a systematic decision making. In the first step, the decision maker identified the problem to be solved, i.e. selection of a company to buy machines to make purer products. In the second step, the criteria of this decision are created, including the quality, the technology and the price of the company to be cooperated. In the third step, the decision maker considers the importance of the criteria, thinking the most important one is quality. In the fourth step, the decision maker searches information, and makes a list of the companies which are in line with these criteria. In the fifth step, the decision maker analyzes these candidate companies and makes comparison based on the information collected. In the sixth step, the decision maker makes the final choice for Company A, believing that Company A is relatively better than others. In the seventh step, the decision maker executes this decision, and signs a contract with Company A. In the eighth and last step, the decision maker evaluates this decision after loss, and thinks it is not proper.
Fourthly, this is a non-programmed decision, because the new machines are very important for the further development of Company C. With these high-tech machines, Company C is able to produce purer chemical products, attract more clients and make more profits. In addition, this decision is not routine, and the decision making will not occur again. The reason is that Company C does not normally make such choice, and will not make the same decision in the future. Furthermore, this decision is made after long-time consideration; Company C takes several months to do so.