Sovereign Decision Scenarios

Get to know how to construct decision-scenarios which include relevant negative consequences!  

If all things would be set for our future we wouldn´t need to sit down, think over our options and seek more alternatives to finally decide for 1 option and go with the consequences.  The best option isn´t given to us or our company, no.  We have to calculate to get it and then do a lot with all involved people to meet the goal with this decision, long-termly.

Complex situations are great to handle if you break details down into 3 parts:  Black, White and Grey.  If you need to calculate a price for a new product for the first offer to your customer who buys thousands of pieces per year, you will first have an eye on the competitors price.  Then you´ll start your internal calculation with 3 different price-scenarios.  You use this as a basis for the internal cost calculation you need to consider:

 

PRODUCT  QUANTITY                     1,0000 pc.                    3,000 pc.                 5,000 pc.

PRICE  A  2014                                        1.20 $                         1.00 $                      0.80 $

PROFIT  A  2014                              1,200.00 $                  3,000.00 $                4,000.00 $

 

PRODUCT  QUANTITY                     1,0000 pc.                    3,000 pc.                 5,000 pc.

PRICE  B  2014                                         1.20 $                         1.10 $                      1.00 $

PROFIT  B  2014                                1,200.00 $                  3,300.00 $                5,000.00 $

 

Of couse this price calculation varies in big steps, because it is an example – in reality it must match your cost scenario and each price per quantity should still be competitive with your competitors price.  Now this is just a small example because the price calculation must consider and wrap ALL costs which are relevant for the production & delivery of these 3 different quantities.

And this is not the end!

A)  If you are able to send out such an offer, be sure your customer will keep on buying from you and will ask for the prices for the next 2-3 years.  Face uncertainties!  Now within the next years the prices of your current suppliers might vary.  One (main)supplier might go down and you suddenly need to find someone else and the new supplier might ask you for a higher price.  A certain risk-calculation needs your attention right from the beginning!

B)  The second (risky) scenario might be that your customer is suddenly so successful with the product you produce and deliver that they ask for more pieces per year than you originally calculated, offered and already deliver.  Their new market shares are challenging you now!  Are you able to produce this extra quantity in the time the customer asks you for?  Think of the capacity you need for the extra production!  (New consequences!) This new challenge doesn´t only concern your machines and workers, but will also challenge your suppliers.  The schedules will be on fire!  And your decision making will burn as well –

As much as scenario B)  might sound positive for you, it might include negative consequences once it becomes a problem.  Be ready for strong argumentations when you have to re-negotiate, internally and externally.  Sit down for new calculations to keep up with your linked decisions.

Best case – have some worst case scenarios ready to follow any time you start making new offers.  The better you´re prepared for new appearing scenarios, the better your decision making will be.  Your routine lasts long-termly for your future!  Be great at the basics –

 

BE A DECISION MAKER.  BE OUTSTANDING.

 

rita jaskolla – Leadership Architect –