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6 CHAPTER 1 INTRODUCTION

rapidly expanding across other business sectors. Data mining goes beyond routine
descriptive or quantitative analysis through the application of sophisticated techni-
ques and algorithms.

Financial Decision Making
MS plays a considerable role in financial decision making and the finance sector is a
major user of MS techniques. Think about your credit card again. Someone at your
bank or finance company had to decide what credit limit to give you when you took
out the card. Too little and you might use a card from another bank. Too much and
you may get into debt and be unable to pay them back the money they’ve effectively
let you spend. Areas where MS is routinely used include credit scoring – where an
individual’s or an organization’s ability to repay credit or loans is assessed quantita-
tively so that the lender can assess the risks involved in the loan; capital and invest-
ment budgeting – where an organization must decide on the appropriate capital or
investment projects it will fund; portfolio management – where a suitable mix of
investments must be determined.

Forecasting
It seems self evident that business organizations need to undertake effective fore-
casting of key business variables. Forecasting future sales for a retail organization;
forecasting air traffic volumes for a busy airport; forecasting demand for medical
care at a new hospital. Getting such forecasts right typically involves analyzing the
situation both quantitatively and qualitatively and a number of MS techniques are
usefully applied in forecasting situations.

Logistics
Logistics management is typically concerned with managing an organization’s supply
chain efficiently and effectively. All organization’s need to manage the supply of
resources that they need to produce goods and services – all the way from having a
new factory built, to the supply of machinery to run the factory, to the power needed
to run the machinery, to the paper clips that will be used in the factory office. In an
increasingly global and competitive economy, good logistics management can make
the difference between business success and failure. MS is routinely used to help
organizations make logistical decisions.
Marketing

The area of marketing is another that makes extensive use of MS. Managers frequently
have to make decisions regarding their organization’s marketing strategy – the
mixture of different marketing media that will be used to promote goods or services.
The decision problem is that different media will incur different costs and will reach
different audiences with varying degrees of effectiveness. The problem for the manager
is deciding what a suitable marketing strategy looks like.

Networks

A network is typically defined as an interconnected group or system of things. The
things might be roads or railways in terms of a transportation network; or computers
in a computer network; or telephones in a telecoms network. Planning and manag-
ing such networks is a critical task if the network is to function effectively – we’ve
probably all been stuck in a traffic jam at some time where the road network
couldn’t handle the traffic volumes or we’ve called through to a call centre to be

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