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Business JSL > 2 - Decision making > Flashcards

2 - Decision making Flashcards

1
Q

What are 7 decision making tools

A
  • SWOT
  • Qualitative forecasting
  • PEST
  • Porters 5 forces
  • Decision trees
  • Quantitative forecasting
  • Ansoff matrix
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2
Q

What is the porters 5 forces model/framework

A

A tool for analysing competition of a business

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3
Q

How does the porters 5 forces model work

A

By examining 5 forces that determine the competitive intensity of an industry, and therefor its profitability and attractiveness to enter/remain in a market

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4
Q

What are the 5 forces in porters 5 forces framework

A
  • Threat of new entrants
  • Threat of substitutes
  • Bargaining power of buyers
  • Bargaining power of suppliers
  • Degree of rivalry
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5
Q

What are some criticisms of porters 5 forces framework

A
  • It assumes a classical perfect market (static and simple)

- Doesn’t take account to external factors

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6
Q

What is meant by an opportunity cost

A

The benefit lost when an alternative is chosen

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7
Q

What is meant by a contingency plan

A

A back up plan, devised for an unexpected outcome of original business plan

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8
Q

What may a contingency plan include

A
  • Identifying what may go wrong and how
  • Understanding impacts of this
  • Devising plans to cope with this
  • Putting in place strategies to stop this from happening
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9
Q

What is forecasting

A

Using existing data to predict future trends

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10
Q

What is meant by qualitative forecasting

A

Using experience and opinions to predict future trends

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11
Q

What are example of qualitative forecasting

A
  • Delphi technique
  • Brainstorming
  • Consumer opinion/expectation(market research)
  • Leading academic opinions
  • Staff opinions
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12
Q

What is meant by the Delphi technique for qualitative forecasting

A

Gaining an expert opinion

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13
Q

What is meant by brainstorming as a method of qualitative forecasting

A

Using a team of experts

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14
Q

What is time series analysis

A

Calculates the average over a period of time

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15
Q

What does raw data do in a time series analysis

A

Looks at trends over time

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16
Q

What does cyclic variations do in a time series analysis

A

Looks at economic booms and downturns

17
Q

What is meant by seasonal variations in a time series analysis

A

Takes into account seasonal factors (eg hotels)

18
Q

What is meant by random fluctuations in a time series analysis

A

Unexpected changes in trends

19
Q

How to calculate a 3 year period total in a time series analysis

A

Add year before, current year and next year

20
Q

What is a 3 year moving average

A

3 year period total/3

21
Q

What is the cyclical variation

A

The difference between that years value and it’s 3 year moving average

22
Q

Benefits of forecasting

A
  • See trends + patterns
  • Secure finance
  • Preparation (contingency plan)
23
Q

Limitations of forecasting

A
  • Only as reliable as data used
  • Uses assumptions
  • Doesn’t account to external factors
24
Q

What is a decision tree

A

A tool used to support/ make decision, showing their possible consequences including chance event outcomes

25
Q

What does a decision tree use to calculate likely outcomes

A

Estimates and probabilities

26
Q

How to work out total expected value in a decision tree

A

(High sales x probability) + (low sales x probability)

27
Q

How to calculate net gain in a decision tree

A

Total expected value - cost

28
Q

Benefits of decision tree

A
  • Considers different options

- Risk can be assessed

29
Q

Drawbacks of decision tree

A
  • Use assumptions of probabilities and estimates

- Ignores qualitative information

30
Q

What does SWOT stand for

A

Strengths
Weaknesses
Opportunities
Threats

31
Q

What does SWOT allow you to do

A

Analyse and evaluate factors

32
Q

Drawback of SWOT

A

Ignores qualitative

33
Q

What is an ansoff matrix

A

A model that helps a business determine its product and market growth strategy

34
Q

Advantages of using ansoff matrix

A
  • Can consider both product and market growth

- Shows opportunity costs

35
Q

Disadvantages of ansoff matrix

A
  • Theoretical

- No qualitative info

36
Q

Draw an ansoff matrix

A

Products along the top
Market along the side
Existing, new

37
Q

What are PEST factors

A

Political
Economic
Social
Technological

38
Q

How is PEST used as a decision making tool

A

Consider these factors before a decision

Business JSL (11 decks)

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