The Vietnamese business man Nam Nguyen decided to set up a hand-embroidery business in Australia. He hired a shop in a shopping mall to sell many different hand-embroidery products such as baby bibs, bedding sheets, towels, table cloths, table runners which were processed in Vietnam. Before leaving for Australia, Nam had been the owner of a hand-embroidery family-owned company in Vietnam for nearly ten years. His company in Vietnam had totally ten employees including five processing workers, one accountant, one office clerical and three sales workers. There were four main reasons why Nam decided to open a shop selling hand-embroidery products in Australia. Firstly, he had intensive experience in running a hand-embroidery company. His small family-owned company had been in good operation through a long time. Secondly, thanks to the fact that the products were processed in Vietnam, he could save a lot of money in hiring labours and staff in Australia. Thirdly, he had had experience in trading with Australian tourists who had always very interested in the Vietnamese traditional products sold in his company’s show room and they had bought a large proportion of his company’s products throughout the years. Finally, he had enough money or capital to set up a new business in Australia.
The main outcome of the decision was that his products were sold very slowly in Australia and instead of getting profits; his shop was at a loss from the beginning. Even though the shopping mall that he chose to hire the stall was very consumer-attractive, there was a very small number of shoppers stopped at his shop and there was even less who purchased his products. He had two Asian sales assistants, Lily and Mike, with whom he was constantly in anger with because he thought it was unreasonable that he still needed to pay them at the Australian rate (which was much higher than the Vietnamese wage standard) while they could not attract enough customers. Thus, Nam often expressed his disappointment about the two assistants and sometimes shouted at them. Lily and Mike gradually felt angry with him too and they no longer cared about the revenue of the shop. They even wanted to stop working for Nam. What made him more frustrated is that Australian customers seem to be very demanding. They could swap the products or ask for a refund just because of a very minor faulty detail or simply because the products did not match their other housing stuffs.
Analysis of the Decision
Nam’s decision in setting up a new business in Australia is a good example of a decision which is made in a situation of uncertainty. Under such circumstance, decision-maker only has a meager database and he or she does not know whether the data are reliable or the extent to which the data are reliable. Moreover, he or she cannot evaluate the interactions of the different variables which may have influence on his or her decision. Such decisions are known as those which are made with bounded rationality. The term was proposed by Simon in 1957 (as cited in Tobert & Hall, 2008) as an alternative basis for the mathematical modelling of decision making. The theory of bounded rationality complements rationality as optimization. It views decision-making process as a comprehensively rational process of reaching an optimal choice given the information available (Gigerenzer & Selten, 2002). Nam had judged that, given all the experience he had gained and the understanding he had had about Australian people, his shop would generate profit. His judgement was not rational since he had based it on insufficient and subjective information.
Firstly, he judged that Australian customers in general should be similar to the Australian tourists coming to his show room in Vietnam. The theory of bounded rationality accepts that all decisions are made under constrains and one among them is the fact that information available to the decision maker is often…