M5-06 lecture

Prescriptive analytics defined

Prescriptive analytics are analyses performed that identify the best possible options given constraints or changing conditions.

Constraints faced by the firm

Every company has limited resources. For example, firms don't receive unlimited investment dollars from shareholders. So, companies must optimize their use of resources.

Changing conditions faced by the firm

Lots of different factors, both inside and outside of a company, affect a company's operations. Examples:

• Changing consumer preferences,

• changing tax laws,

• changing interest rates,

• changing risk levels,

• changing exchange rates, and

• changing demand for employees and their expertise.

Companies must constantly change and adapt to meet the needs of the market and environment.

Test approaches for prescriptive analytics