28 Dec 2012

HOW TO CRACK DM QUESTIONS IN XAT






Decision making questions are one of the unique features of XAT. Aspirants are tested for their business acumen and ability to handle professional and ethical dilemmas. Students may expect REAL LIFE BUSINESS CASES. Most of the students appearing for XAT enter the examination hall without any proper preparation for this section. Following framework will help aspirants to tackle the decision making problems efficiently:




If one has to define one line framework, it shall be as simple as “select the option which makes best business sense and doesn’t compromise on ethics”. Easier said than done. When aspirants face complex scenarios, with very close and confusing options, it becomes very difficult for them to attempt. I have developed following pointers based on previous question papers.




BUSINESS SENSE:

1. A basic knowledge of business terms (along with their application) like- Break-even Point, Partnership, working partner & dormant partner, dividend, share, assets & liabilities etc. will go a long way in helping students to quickly grasp the situation

2. Doing what is right for business is more important than pleasing everyone

Facts are more important than judgements/opinions; make your decision based on facts provided in the case and not on the basis of judgements/opinions given by any individual/author in the case

3. A manager by his actions can maximise Revenues or sales, Profit or shareholder’s worth. 4. 4. Aspirants should look for options, which maximises shareholder’s worth. For example:- Sales volume can be increased by randomly decreasing selling price; profit can be increased by cutting costs in arbitrary way, delaying maintenance expenses etc. These two options however are not good in long term and will reduce the shareholder’s value, hence should not be adopted.

5. Don’t just look to maximise profits, Employee motivation and social responsibility are also important

6. Some questions can be answered simply by analysing the case and choosing the best one as per figures and data provided in case

7. Sometimes paper-setters try to direct the student’s thought-process in a particular way, by giving definition/special meaning of certain terms used in questions. Follow them verbatim.

8. Don’t assume anything until either explicitly given in the case or is an universal/well accepted truth

9. Questions may involve a bit of critical reasoning, which you should have prepared for VA section. Just don’t forget to apply those concepts in DM section also

10. Go through Business/Financial articles, reports, blogs etc. This will give you a better understanding of how business is done. Additionally this exercise will train your eyes & mind to quickly scan and process a huge amount of DATA, graphs, comparisons and other information

11. Questions are often made complicated by adding a moral conflict perspective to it; here aspirants should see which option strikes best balance between, profitability, feasibility and morality. Let’s now look at some frameworks to handle those scenarios (adapted from the works of Manuel Velasquez, Claire Andre, Thomas Shanks, S.J., and Michael J. Meyer)




1. THE UTILITARIAN APPROACH

To analyze an issue using the utilitarian approach, we first identify the various courses of action available. Second, we ask who will be affected by each action and what benefits or harms will be derived from each. And third, we choose the action that will produce the greatest benefits and the least harm. The ethical action is the one that provides the greatest good for the greatest number.




2. THE RIGHTS APPROACH

According to this, people are not objects to be manipulated; it is a violation of human dignity to use people in ways they do not freely choose. Of course, many different, but related, rights exist besides this basic one. These other rights (an incomplete list below) can be thought of as different aspects of the basic right to be treated as we choose.




The right to the truth: We have a right to be told the truth and to be informed about matters that significantly affect our choices.

The right of privacy: We have the right to do, believe, and say whatever we choose in our personal lives so long as we do not violate the rights of others.

The right not to be injured: We have the right not to be harmed or injured unless we freely and knowingly do something to deserve punishment or we freely and knowingly choose to risk such injuries.

The right to what is agreed: We have a right to what has been promised by those with whom we have freely entered into a contract or agreement.




3. THE FAIRNESS OR JUSTICE APPROACH

"Equals should be treated equally and unequals unequally." Favoritism gives benefits to some people without a justifiable reason for singling them out; discrimination imposes burdens on people who are no different from those on whom burdens are not imposed. Both favoritism and discrimination are unjust and wrong.




4. THE COMMON-GOOD APPROACH

This approach to ethics assumes a society comprising individuals whose own good is inextricably linked to the good of the community. Community members are bound by the pursuit of common values and goals. In this approach, we focus on ensuring that the social policies, social systems, institutions, and environments on which we depend are beneficial to all.




Appeals to the common good urge us to view ourselves as members of the same community, reflecting on broad questions concerning the kind of society we want to become and how we are to achieve that society. (Aspirants may see this from point of view of a company/firm or whole society, as per the question.) While respecting and valuing the freedom of individuals to pursue their own goals, the common-good approach challenges us also to recognize and further those goals we share in common.




5. THE VIRTUE APPROACH

The virtue approach to ethics assumes that there are certain ideals toward which we should strive, which provide for the full development of our humanity. Virtues are attitudes or character traits that enable us to be and to act in ways that develop our highest potential. They enable us to pursue the ideals we have adopted. Honesty, courage, compassion, generosity, fidelity, integrity, fairness, self-control, and prudence are all examples of virtues. Think what traits one should display as a manager or an entrepreneur etc.




THE ACTION PLAN:- points to ponder

• Start with situation analysis and understand the whole scenario

• Which action makes business sense and is practically feasible

• If and only if moral conflicts are involved, apply one of above mentioned approaches to analyze it

• What benefits and what harms will each course of action produce, and which alternative will lead to the best overall consequences?

• Illegal/blatantly immoral or clearly loss making options should be eliminated

• What moral/legal rights do the affected parties have, & which option best respects those rights?

• “If you are able to eliminate a few options, do go with your best possible guess. In these type of questions it’s not possible to be 100% sure”

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