3.2.2

Question 1

What are the 5 stages in the Decision Making Process?

Answer 1

1. Set objectives
2. Gather Information
3. Closing course of action
4. Implementation
5. Review

Question 2

What is involved in setting objectives in the decision making process?

Answer 2

Looking at common business objectives. Corporate and Functional

Question 3

What is involved in gathering information in the decision making process?

Answer 3

Factors such as risk, reward and uncertainty will be taken into account

Question 4

What is involved in choosing course of action in the decision making process?

Answer 4

Deciding to be strategic or tactical to meet the hunch or scientific approach

Question 5

What is involved in implementation in the decision making process?

Answer 5

Managing others to get things done

Question 6

What is involved in reviewing in the decision making process?

Answer 6

A range of techniques can be used to evaluate success.

Question 7

What are the 4 key decision making factors?

Answer 7

1. Risk
2. Reward
3. Uncertainty
4. Opportunity Cost

Question 8

What is involved in risk as a key decision making factor?

Answer 8

The chance of loss or misfortune. Referred to as financial loss

Extent of impact x probably of occurrence

Question 9

What is involved in reward as a key decision making factor?

Answer 9

Benefits from it. Risk may be worth reward.

Question 10

What is involved in uncertainty as a key decision making factor?

Answer 10

Very little is certain in the business. Questioning reliability of decision based information

Question 11

What is involved in opportunity cost as a key decision making factor?

Answer 11

Next best opportunity lost. Managers must go for most beneficial option

Question 12

Name one advantage about data bases decisions and intuition based decisions.

Answer 12

Data: can help reduce risk, identifying likely outcomes. Helps compare alternatives

Intuition: may come from experience and useful in qualitative decisions such as brand name.

Question 13

Name one disadvantage about data bases decisions and intuition based decisions.

Answer 13

Data: hard and/or expensive to collect especially for smaller businesses

Intuition: without evidence decisions are t at high risk

Question 14

What are 3 benefits of Decision trees?

Answer 14

1. Clarifies possible actions
2. Adds financial data to decisions
3. Accounts for risk

Question 15

What are 3 limitations of Decision trees?

Answer 15

1. Estimates probabilities
2. Qualitative information not taken into account
3. Dynamic business nature not taken into account

Question 16

What are 5 influences on Decision Making?

Answer 16

1. Mission and objectives
2. Ethics, moral compass
3. Some managers are more risk adverse than others
4. Ever changing external environment
5. Resource Availability and constraint

Question 17

How do you calculate expected value?

Answer 17

(Prob 1 x amount 1) + (Prob 2 x amount 2)

Question 18

How do you calculate the net gain?

Answer 18

Expected Value - Initial Cost