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Environmental influences

3.3 Maximax

 Looks at best possible (maximum) return for each course of
action.

 Chooses the course of action with the highest maximum
return.

Suitability of tool for organisation

 Suitable if organisation is risk seeking

 An optimistic approach – the organisation chooses the course of action with
the highest maximum return.

 Risks making a lower profit if the maximum outcome is not delivered.

3.4 Maximin

 Looks at worst possible (minimum) return for each course of
action.

 Chooses the course of action with the highest minimum return.

Suitability of tool for organisation

 Suitable if organisation is risk averse

 A pessimistic approach – the organisation chooses the course of action with
the highest minimum return.

 Loses out on the possibility of making a bigger profit.

3.5 Minimax regret

 Looks at maximum regret (opportunity cost) for each course of
action.

 Chooses the course of action that minimises this maximum
regret.

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