Expand on your self-evaluation by identifying at least two judgment issues that you had to address...

1. Define the problem, characterizing the general purpose of your
decision.

Should I merge the acquired company into my company or operate the
acquired company as a separate business entity - the results of this
strategy will be two separate companies under one senior management
"umbrella" the senior management team that is responsible for
running both companies?

The purpose of my decision is to make the most profitable business
decision. The structure of the transaction is of critical importance
because it affects the form and liabilities of the ongoing business, the
protections available to its owners, and the taxation of each entity and
its owners.

2. Identify the criteria, specifying the goals or objectives that you
want to be able to accomplish.

a.         Increase profit margin

b.        Downsize in a way that will respect and motivate the
most number of employees

c.         Maintain as many employees as possible

3. Weight the criteria, deciding the relative importance of the goals.

In the order presented above

4. Generate alternatives, identifying possible courses of action that
might accomplish your various goals.

a.         Merge the acquired company into my company

b.        Or operate the acquired company as a separate business
entity. The results of this strategy will be two separate companies
under one senior management "umbrella" the senior management team that
is responsible for running both companies.

5. Rate each alternative on each criterion, assessing the extent to
which each action would accomplish each goal.

a. Merge the acquired company into my company

Pros

-            Potential to increase shareholder value - that
of achieving cost and/or revenue benefits.

-            Improve channels of delivery

-            While improving sales and revenue, it can also
provide a competitive advantage over the competition. For example, the
proposed merger of mobile phone carriers Voice Stream and Cingular
Wireless could improve service and add features, experts said, but the
deal could also hurt competition in the telecommunications industry
(Source: HYPERLINK
"http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2002/
08/21/BU76999.DTL&type=business"
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2002/0
8/21/BU76999.DTL&type=business )

CONS

Lack of experience about the risks and activities of mergers and
acquisitions – choose to go the monetary role which ignores the
importance of others experience and expertise.

-            Lack of agreement about the best strategic
implementation strategy – Other executives has learned the hard way
that when the merging of two businesses does not go smoothly, talent
soon quits and projects drag out.

-            Possibility of destroying shareholder value -
Several solid studies report that as many as 75% of all mergers actually
destroy shareholder value instead of achieving cost and/or revenue
benefits.

-            Partner decides to micromanage - Like most
entrepreneurs, the American Dental Partners founder would not have
welcomed pressure to acquire just for the sake of growth. "You want to
make sure you bring in a partner who's not going to micromanage," he
says. Company builders who sense that a potential equity partner may
push too hard for acquisitions just to spur growth will be smart to
delete that firm from the shortlist. The critical point is this: the
entrepreneur runs the acquisition show, and must be comfortable with all
likely deals ((Source: HYPERLINK
"http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2002/
08/21/BU76999.DTL&type=business"
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2002/0
8/21/BU76999.DTL&type=business )

b. Or operate the acquired company as a separate business entity. The
results of this strategy will be two separate companies under one senior
management "umbrella" the senior management team that is responsible for
running both companies.

PROS

-          Retain control over your own company and the
strategic planning and decision-making process.

-          A company might benefit by teaming with the
management of another corporation, or might achieve an increase in its
market share.

-          The combination might also improve channels of
delivery for the parties to the transaction, helping them compete more
effectively.

-          There may be positive estate planning or retirement
motives. (Source: HYPERLINK
"http://library.findlaw.com/2000/Oct/1/129257.html"
http://library.findlaw.com/2000/Oct/1/129257.html ).

-          Potential tax benefits

CONS

-            Potential accounting and legal concerns (see
HYPERLINK "http://library.findlaw.com/2000/Oct/1/129257.html"
http://library.findlaw.com/2000/Oct/1/129257.html ).

-            Stakeholders may not agree

-            Employees may create potential problems if they
disagree with this strategy

6.Compute the optimal decision, evaluating each alternative by
multiplying the expected effectiveness of each alternative with respect
to a criterion times the weight of the criterion, then adding up the
expected value of the alternative with respect to all criteria.

Two alternatives: To merge the acquired company into my company or
operate the acquired company as a separate business entity. The results
of this strategy will be two separate companies under one senior
management "umbrella" the senior management team that is responsible for
running both companies.

Best Decision: To operate the acquired company as a separate business
entity. The results of this strategy will be two separate companies
under one senior management "umbrella" the senior management team that
is responsible for running both companies.

Based on Goals as Criteria:

a. Increase profit margin

b. Downsize in a way that will respect and motivate the most number of
employees

c. Maintain as many employees as possible

I picked the alternative with the highest expected value and made a
decision based on calculation, not on subjective emotional reactions.
You would know it is working if your objectives have been realized, or
are being realized. For example, my company is benefiting profit wise
by teaming up with the management and the market share has increased.
You have increased or improved your channel of delivery and have the
competitive advantage over the competition. Thus, the strategy is
working if your initial intentions for the acquisition are coming to
pass, and other positive consequences outweigh to potential risks.
(Source: HYPERLINK
"http://cogsci.uwaterloo.ca/Articles/Pages/how-to-decide.html"
http://cogsci.uwaterloo.ca/Articles/Pages/how-to-decide.html ).

2. Make sure your email addresses the following issues: Were there any
discrepancies between the calculated "optimal" decision and your actual
(or favored) decision? If so, what might account for the discrepancies?

There were no discrepancies between the two. However, I had a “gut
feeling” about one alternative to the other, just because it “made
more sense” to me. In this case, it coincided with the chosen
decision, but that is not always the case. In fact, that is one
criticism of this model, that there is little room for intuition and
emotional judgments based on this “rational” decision-making model.

There are theoretical explanations for “gut feeling” decisions. For
example, aductive inference is accomplished in humans by a neural
network that performs parallel constraint satisfaction in a way that
maximizes explanatory coherence. People have no conscious access to this
process: when you realize you prefer one theory over another, you do not
really know why, although you may be able to retrace your intellectual
history of acquiring the various hypotheses and evidence that
contributed to your preference. All you can say is that one theory
"makes more sense" to you than the other. This is not to say that
inferences based on explanatory coherence are irrational, since they may
well involve maximization of coherence with respect to the available
hypotheses and evidence. However, given the limited access to mental
processes, there is no way you can directly know that you have maximized
coherence. This is where emotions are crucial. According to this
author’s recent theory of emotional coherence, the way you know that
you have achieved explanatory coherence is by a feeling of happiness
that emerges from the satisfaction of many constraints in your neural
network (Thagard 2000, p. 194ff.)

Highly coherent theories are praised by scientist for their elegance
and beauty. Because we cannot extract from our brains judgments such as
"Acceptance of theory T1 satisfies .69 of the relevant constraints", we
have to fall back on the overall emotional judgment such as "T1 just
makes sense." Thus, the feeling of happiness that emerges from a
coherence judgment is part of our ability to assess scientific theories.
Ideally, a good theory generates a kind of emotional gestalt that
signals its coherence with the evidence and the rest of our beliefs.
Negative emotions attached to a theory signal that it does not fit with
our other beliefs, and a general feeling of anxiety may signal that none
of the available theories is very coherent. In fact, such anxiety
triggered a search for new hypotheses.

So, a decision based on a gut feeling could represent an emotional
judgment and, according to this theory, may be a valid sign of a highly
coherent evaluation of competing hypotheses to the “rational”
decision making process.

The problem is that such a feeling may instead signal a different kind
of coherence based on wishful thinking or motivated inference rather
than fit with the evidence. I once got a letter from someone urging me
to send my explanatory coherence computer program to him right away,
because he had a theory of the universe that no one else believed, and
my program might help him convince other people. Presumably, his
attachment to his theory was based more on satisfaction of personal
goals than on it providing the best explanation of all the evidence.
Noting the role of emotion in appreciating coherence may seem to endorse
the romantic view: If it feels good, believe it (See HYPERLINK
"http://cogsci.uwaterloo.ca/Articles/Pages/critique.html"
http://cogsci.uwaterloo.ca/Articles/Pages/critique.html for more
coverage).

What problems, if any, did you encounter when completing the steps? (For
example, were you able to compute an optimal decision? If not, why not?)


It was too mechanical for my liking, and I felt held back by ignoring my
inner senses of intuition, my “gut feeling,” which I refer to
intuition.

Are there any weaknesses in the "fully rational" model of
decision-making? If so, what are they?

Yes, there is because often our “gut feeling” means something when
making business decisions, and is often important to pay attention to.
One author says it like this: Practical inference is not simply produced
by practical syllogisms or cost-benefit calculations, but requires
assessment of the coherence of positively and negatively interconnected
goals and actions. This assessment is an unconscious process based in
part on emotional valences attached to the various goals to be taken
into consideration, and yields a conscious judgment that is not just a
belief about what is the best action to perform but also a positive
emotional attitude toward that action. Reason and emotion need not be in
conflict with each other, if the emotional judgment that arises from a
coherence assessment takes into account the relevant actions and goals
and the relations between them. The procedure I recommend, Informed
Intuition, shows how decisions can be both intuitive and reasonable (
HYPERLINK "http://cogsci.uwaterloo.ca/Articles/Pages/how-to-decide.html"
http://cogsci.uwaterloo.ca/Articles/Pages/how-to-decide.html ).