1 Introduction

Identifying promising locations for establishing a new business unit is a very

common decision problem among organizations. Although one can argue that it
is a simple matter of ranking the alternatives against some well weighted
criteria, it´s important to have in mind that, in order to set those criteria, a
structuring step have to be performed.

The present work addresses the question of site location decision by applying
an approach that would help to establish an analytical framework for that issue.
More specifically, it focuses on a decision aiding process capable of supporting
the choice of the location of a new unit for a small clinical laboratory in Brazil.

In this purpose, this work brings initially a literature review, exposing theoretical
references relevant to strategic management of companies, based on the
search for competitiveness. Similarly, the chapter presents aspects concerning
problem structuring in the organizational environment.

On the continuity, the method found in literature is explained in its general

characteristics, giving a comprehensive view of its applicability.

In its fourth part, the method is finally applied in a case study, where the
techniques proposed by the literature are put into action in a real decision
problem. Also, final considerations are made about the applicability of the
structuring method found in literature.

2 Literature review

2.1 Strategic Management

The strategic management of companies, as highlighted by Rocha (1999),

refers to management techniques, evaluation, and related tools designed to
help companies on making strategic decisions at high level. Saloner, Shepard
and Podolny (2003) define strategy as the way to establish a framework for
guiding the choice of actions.

The concept of competitive strategy emanates from the relationship between

organization and its surroundings (environment). If, on the one hand, the
environment represents a constraint on the activity of the organization, on the
other hand it offers opportunities to avail of. The strategic benefit is
characterized by obtaining and/or supporting advantage over the competition.

2.2 Competitive advantage

One aspect that stands out in a company is the way it takes to gain competitive
advantage and, thus, the ability to create value. As quoted by Saloner, Shepard
and Podolny (2003), the value creation is the core of any successful strategy.
This concept highlights the fact that, to thrive, the company must be able to
retain the value it creates. To achieve this, it has to have a sustainable
competitive advantage.

Still according to those authors, the competitive advantage is divided into two
categories: those benefits based on the position and advantage based on the
firm's capabilities.

The positional advantage reflects the condition of the company in terms of

remaining in its market as one that does not have a competitor who can break
their dominance. This condition itself is enough to assure higher yields, even
though the company has not high-level skills.

The advantage based on competence is characterized by giving the company a

capacity so that the market sees it as the best among the others competitors in
the performance of certain activities. From this perspective, competitive
advantage is achieved when an organization is able to obtain resources and
offer products and services with higher quality, lower cost, or in shorter period
than the competition, or performs well in all three requirements. However, these
factors may change over time.
2.3 Decision in the organizational environment

According to Howard (apud Bana e Costa, 2007) "a decision is a means to

achieve goals, and make a decision is to make a choice, that translates into
actions of resource allocation."

The complexity and uncertainty in decision making often lead to delay important
decisions or even to "decide to decide anything." Furthermore, the difficulty of
taking a decision may lead managers to adopt wrong strategies.

As von Winterfeldt and Edwards expose (2007), most examples of decision

analysis shown in the books is well structured, with choices, objectives, events
and uncertainties previously set. Thus arrayed, it seems easy to identify what is
the most appropriate analysis technique. However, according to the experience
of most decision analysts, it is not how it happens in real life.

The most common situation is far from that ordered scene, becoming, in effect,
a set of vague concepts, needs not well understood and a sense of amazement
on how to find a line of action that would, in a reasonably manner, put it all in
sight.

Structuring decision problems is a crucial element for any analysis to be done.

In this manner, cognitive mapping is a widely used tool for structuring complex
problems.

2.4.1 Cognitive mapping

For Gomes et al. (2006, p. 44), "[...] the cognitive mapping is a technique that
enables to portray ideas, feelings, values and attitudes and their
interrelationships in order to make possible a study and a subsequent analysis,
using such a graphical representation. "

According to Vergara (2006, p. 142), "[...] the maps are dynamic

representations ,[...] updated as new information is processed. " indicate that
cognitive maps are graphical representations of "[...] a set of discursive
representations produced by an individual related to an object in a particular
context of interaction. "

Cosset and Audet (1992) also claim that a cognitive map can be defined as a
fourfold representation, lagged in time. The decision-maker, immersed in the
decision context, formulate a mental representation of its impressions. This is
the time t 1. Prompted by the facilitator, verbalizes these impressions at time t 2.

The facilitator, hearing the report of the decision-maker, produces his own
mental representation of the problem, thus the time t 3. At time t 4, the facilitator
graphically represents what he interpretates from the expressions of the
decision maker. There are also two feedback times in the process, represented
by L1 and L2. In the first, the decision maker, as orally express their views,
compare them with what he has in mind and can refine what he expressed,
adding or removing data. Such refinement may also occur in L2, since the DM
may or may not agree with the representations made by the facilitator.

Fig. 1: Cognitive mapping process.

Eden (1992) draws attention to the fact that the map is not a model of cognition
that allows the description and prediction of the decision maker's thinking. That
lagged representation rightly points out that there is a distinction between what
is in the "head" of the decision maker and what is on the map. It remains,
however, its value as a tool for learning about the considered problem.
3 Method of structuring

According to Ensslin et al. the construction of a cognitive map allows the

decision maker to clarify his values related to the decision problem. Those
authors point to a sequence of steps that constitute the structuring and analysis
of the cognitive map.

3.1 Structuring the cognitive map

(2001) show that the first step in structuring the cognitive map is the definition
of a label to the problem. For that author, "the label allows to define the decision
context, in order to keep the focus on the most relevant aspects involved in
solving the problem of the decision maker." One could also say that the label
contains the goal or goals of the decision maker. In other words, that is what he
wants to achieve with the decision (VON WINTERFELDT; WARD EDWARDS,
2007). That label is not definitive and may be modified during the process of
decision support.

Once the label for the problem is established, the facilitator then asks the
decision maker to list its primary elements of assessment (PEA). The PEAs are
generated through a brainstorming process, and represent the aspects the
decision maker would take into account when considering the alternatives. The
PEAs are known in the common sense of people, as criteria, but have no formal
structure to be considered like that, in the light of the theory of decision
analysis.

Since the elaboration of PEAs gets completed, the facilitator initiates the
development of concepts that will be constructed and put into a hierarchy in the
cognitive map.

The concepts are action-oriented statements. Have bipolar character, and

express opposition to the first pole (Eden et al, 1983). The concepts are
constructed in two distinct ways:

- From the PEA - Addition of an infinitive verb to the PEA, building up

a short sentence and consistent with their origin.
 - From other concepts - Through questions like "why" (why is this
concept important? ") concepts oriented to the purposes of the
decision maker are built. The "how" questions ("how to achieve
those concepts"), generate concepts oriented to the means by
which purposes concepts are to be achieved.

The map consists, basically, of means concepts and end concepts, related to
each other for influence and hierarchy .

Once the concepts are arranged on the map, connected by relations of

influence (arrows linking one mean concept to an end concept), one can
consider that it is established a tree structure of concepts. It is from this
structure that the cognitive map will be analyzed.

3.2 Analysis of the cognitive map

The elements of analysis in a cognitive map are head concepts, tail concepts,
clusters, branches and lines of argument. Understanding those elements,
arranged on a map, allows the facilitator to identify the Fundamental Points of
View (FPVS) of the decision maker. Considerations regarding the items listed
above are in subsequent sections.

3.2.1 Head concepts and tail concepts

By observing the hierarchical structure built in a cognitive map, one can see that
there are concepts that show only leaving arrows, therefore called tail concepts
On the other hand, concepts that only receive the arrows are called head
concepts. To Ensslin et al (2001, p. 112), head concepts show the most
fundamental considerations (objectives, goals, outcomes, values, etc..) of the
decision maker, expressed on the map. The tail concepts, in their turn, address
the possible options to achieve those essential elements.

3.2.2 Clusters of cognitive map

Clusters are groups of concepts that can be visually identified on the cognitive
map. Those groups are formed as a result of the affinities among the concepts.

To Ensslin et al (2001, p. 115), the detection of these sets of related concepts

can occur by examining the arrangement of concepts in the map (traditional
analysis) or, optionally, by examining the form and content (advanced analysis).
This detection allows to consider these clusters as "islands" within the global
cognitive map. For those authors, the analysis of the clusters identified in the
map helps to reduce complexity

3.2.3 Lines of argument

A line of reasoning in a cognitive map consists in a sequence of concepts that

connect to each other by a relationship of influence (why/because, what/how,
etc.). It starts in a tail concept and fihishes in a head concept. A concept can
attend more than one line of argument.

From the analysis of the content in these lines, the decision maker can then
identify the branches on the map.

3.2.4 Branches

The identification of the branches in a cognitive map is based on similarities of

interest depicted in the lines of argument. It may, thus, coincide with one of
those lines or encompass more than one, as the ideas are close Thus, this
identification is basically based in the content analysis of the map
(MONTIBELER NETO, 1996; ENSSLIN ET AL, 2001).

On the branches are established axes of evaluation. The axes of evaluation

express the aspects that actually the decision maker (after the discussions
fostered by the mapping) considers relevant for the analysis of his problem,
which constitute the fundamental points of view of the decision maker.

3.2.5 Fundamental Points of View

Bana e Costa (1992, p. 113) introduced the concept of Point of View (PV) as
elements which represent all aspects of the decision scene that the man of
studies realizes as important for the construction of a model of evaluation to the
existing actions or to the ones to be created". For the author, the PV play a dual
role in a decision process a maker of PVs perform a dual role in decision
making. On the one hand, those PVs make clear the values that an individual
considers important to consider in a particular decision context. Simultaneously,
the PVs address the characteristics of the actions that the decision maker
considers as relevant.

Among the PVs, Bana e Costa (1992) highlights the Fundamental Points of
View (FPVS). For the author, FPVS are the PVs that reflect a fundamental
value for the decision maker in a given decision context. The FPVS contribute,
in the perspective of the decision maker, to reach the objectives of the decision.
The author also sets out the Elementary Points of View (EPVs), elements that
can act as a means to obtain the FPVS.

The next section reports on a case study where the structuring occurred in
accordance with the use of cognitive mapping, as presented here.

4-Case study: Labormed

Labormed is an organization that can be characterized as micro-enterprise. It

was founded in 2001 by an entrepreneur who saw the business opportunity
when played the role of physician in some cities in Rio Grande do Norte, Brazil.
During his medical training at the Federal University of that State, the academic
realized that there was an opportunity to offer services of samples collection
and anaysis, due to the lack of provision of such service in inland towns of the
state.

Most small towns of Rio Grande do Norte is in need of laboratory services. The
inhabitants of these places often find themselves in a need to go to a service
center nearest in bigger cities, either to perform the tests, as for the results. In
the municipalities that are endowed with public laboratories, the patients have to
wait several days for the results. That could be dangerous sometimes, due to
the possibility of disease evaluation.

That is the environment in wich the entrepreneur saw his business oportunity:
an outpost of clinical laboratory, providing the service of sample collection and
subsequent delivery of its results. The samples are acctually tested in an
outsourced laboratory.

4.1 The business model

The idealization of Labormed business is founded on two assumptions: low

operating costs and service fee.

Being a business for profit, the Labormed competes by differentiation against a

public laboratory, considering that the latter has services fully funded by
government. The differentiation is based intrinsically on the responsiveness of
the results.

On the other hand, the venture also competes in price compared to other
private laboratories, even when these are located in nearby towns. In his policy
of pricing, the entrepreneur compares prices charged by competitors, added
with transportation costs, which would make it more attractive to a potential
customer in moving to another lab in a neighboring town. If the laboratory is
located in the same city where Labormed operates, prices are adjusted to
values lower than the competitor Thus, we find a hybrid practice of seeking
competitive advantage, although empirically founded.

The services offered can be summarized as a collection of samples for

laboratory tests, sending to a clinical laboratory outsourcing, collection of
examination results and delivery of results to clients. Since the analysis is done
by another laboratory, the equipments required for the installation of business
are few and cheap, reducing the risk of sunk costs in the raid. Moreover, the
expertise required for labor is not high, which makes the technical requirements
required to be easily found in the local population.
4.2 The decision problem

The first Labormed unit was installed in a small town of Rio Grande do Norte,
Brazil, in November 2005. Some months later, in February 2006, came the
second business unit in another town of the same State. Although the two units
are profitable, the entrepreneur feels that the second one does not meet his
initial expectations. He assigns to it the fact of not having fully followed his
points of views in the site location.

On the other hand, the entrepreneur, given the positive results of the first unit,
coupled with the facilitation of the Federal Government for the release of loans
to micro and small enterprises, is planning to open a new unit. This time,
however, he wants to be sure that the factors that he thinks as important to be
taken into account will actually be considered throughout the process.

With that at hand, the method exposed along this work was put into action, and
the decision problem was structured by the use of cognitive mapping, allowing
meeting the following results.

4.3 Analysis of results and conclusion

It was possible to observe, at the bgining, that the decision maker of the
complex issue reported in this study is an entrepreneur who was facing a
situation over which was not too sure how to proceed, and therefore this
situation was a problem for him. That difficulty of understanding all the nuances
of his problem had already drived him to adopt a wrong strategy when opening
a second business unit, some months later. Also, his problem dealt with the
consideration of multiple factors, which were not fully understood.

The work of constructing the cognitive map allows to understand how the
aspects taken into account by the decision maker were concerned with his
ultimate goal. Furthermore, the search of mean concepts allwed identifying new
elements needed to structure the problem.
The identification of clusters in the cognitive map shown to be effective to
understand the macro aspects the decision maker would like to see in an
alternative, as he analyzes it from the perspective of whether it is a good
candidate for the installation of his enterprise. The three identified clusters
reveal the main aspects that the decision maker would take into account when
considering a city: its potential regarding the amount of population that could
use the services of his laboratory, the predisposition of the population for health
care spents and ease of transportation (logistics) the city presents to the order
of samples and collection of results.

The continuity of the process showed that many of those aspects the decision
maker would like to take into account in the analysis of cities constituted
themselves, in fact, in indicators of what he would really like to know about the
alternatives. However, that fact does not diminish the importance of those
factors in the decision context. Instead, it allowed to organize those factors and
allowed the decision maker to understand the real role of each one of them in
his assessment, that is to allow the consideration of those aspects that he
would really like to know about the cities to be evaluated. Moreover, the
establishment of branches in the cognitive map allowed the ranking of these
factors, which allowed to generate the hierarchical structure of the problem, as
can be seen in Figure 2

Figure 2 - Hierarchical structure of the Fundamental Points of View

Therefore, the development of the decision maker's cognitive map allowed to
verify the adequacy of that tool for structuring a site location decision problem,
where the complexity, given the multiplicity of factors to take into account, acted
as the main feature.

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