The Welsh region had several opportunities to win the game before Simon Zebo pounced for Munster on the 68th minute for the match-winning try.
The defeat ultimately ended the Scarlets play-off hopes and they could now face a battle for European qualification with the Newport Gwent Dragons breathing down their necks.
"We're disappointed with the loss to Munster," said Davies.
"In the first half we could have taken control of that game if we were more accurate. We had lots of opportunities and we just weren't good enough.
"It was a big test for this team, to come up against of a side of Munster's quality but more than anything else it was a test of our players' winning mentality.
"That's a line this team have to cross at the moment. We haven't crossed that line yet - there is enough endeavour, there is enough quality and we can perform. But we have to couple that with winning, and we're not doing at the moment.
"We're in all games we play, we're competitive, we have and can probably out perform most sides, but we have to win. But there were critical moments again in this game that we got wrong."
The Scarlets face Glasgow on Friday night and Davies has called on his young side to bounce back from the Munster defeat.
"The Munster game sums up our season in many ways, nearly but not quite," added Davies.
"That's hugely disappointing because instead of competing for an opportunity for a play-off place in the top four we now have a battle on our hands. That's the reality of the situation so we are going to have to learn how to get those wins very quickly.
"We can't control other results, what we can do is control our own games, it's a matter
of turning this around. We've got to be right on our game for this match against Glasgow on Friday night."
But the Scarlets are once again likely to be without Jon Davies, who is still struggling with a dead leg, while Ben Morgan has a hamstring tear.
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