1. The Decision-Making Model
EXAMPLE - Car Dealership

2. STEP 1 Determine the decision to be made
How many vehicles of each model should the car dealership keep on the lot to satisfy consumer demand?

3. STEP 2 Identify the alternatives
Several models of each type of vehicle
Only have one model of each type of vehicle
Several models of some vehicles and only one model of others

4. STEP 3 Evaluate the advantages and disadvantages of alternatives
Advantage: gives consumers a number of choices Disadvantage: the cost of purchasing many vehicles and finding space to display and store the inventory
Advantage: smaller inventory, not a lot of cost, therefore more money on advertising
Disadvantage: consumers like to have variety to choose from

5. STEP 3 - Continued
Evaluate the advantages and disadvantages of alternatives
Advantage: customers have a number of choices of the more popular models (colours and features)
Disadvantage: the additional costs for extra inventory

6. STEP 4 Make a decision and take action
Smaller dealers may choose option #2 and put money into advertising to promote the dealership
Larger dealerships may choose option #3 since this may increase the chance of a sale

7. STEP 5 Evaluate the decision
After 6 months, the smaller dealer will compare sales to see if putting money into advertising has resulted in increased profit
New alternatives may come up