3.2.2 Management decision making

Question 1

4 what is opportunity cost

Answer 1

the benefit forgone for the next best alternative

Question 2

4 what is scientific decision making

Answer 2

decision taken on the basis of analysis of data and evidence

Question 3

4 what is big data

Answer 3

huge, often unstructured data sets that exceed the processing capacities of conventional data base systems

Question 4

4 what is decision making

Answer 4

a specific commitment to an action
know what you are going to achieve
consider the next best alternative
commit resources to an action
uncertainty about outcome

Question 5

4 what is a decision tree

Answer 5

a mathematical model to help managers make decisions
use estimates and probabilities to calculate outcomes
net gain is worth it, pictorial approach

Question 6

4 how are decision trees helpful

Answer 6

quantify decision making
useful when outcomes are uncertain
place a numerical value on unlikely or potential outcomes
allows different courses to be taken

Question 7

4 what is the expected value

Answer 7

financial outcomes from a specific course of action to allow for the probability of it occurring

Question 8

4 what is net gains

Answer 8

expected value of a course of action minus cost associated with it

Question 9

4 what is a square

Answer 9

decision

Question 10

4 what is a circle

Answer 10

uncertain outcomes

Question 11

4 how many options are there usually

Answer 11

choice 1 - most certain
choice 2 - alternative
choice 3 - do nothing

Question 12

4 how do you get financial results

Answer 12

effect x probability

Question 13

4 how do you get net gain

Answer 13

results - costs

Question 14

4 what are the advantages of decision trees

Answer 14

useful for operational decision making
enables effective data use
probability allows flexibility
scientific analysis to decision making
encourage clear thinking

Question 15

4 what are the disadvantages of decision trees

Answer 15

reliant on accuracy of data given
requires qualitative data to give complete picture
probability is only estimates
real time data problems

Question 16

4 what is qualitative data

Answer 16

data in feedback, opinion format

Question 17

4 what is quantitative data

Answer 17

numbers and statistics

Question 18

5 what are the five steps of decision making?

Answer 18

setting objectives
gathering and interpreting information
selecting the chosen option
implementing decision
reviewing it

Question 19

5 what is scientific decision making

Answer 19

anything based on data

Question 20

5 advantages for scientific decision making?

Answer 20

remove bias as far as possible
reduce risk-based on well researched data
sets SMART targets
involves several people
doesn’t remove mistakes but limits impact

Question 21

5 disadvantages for scientific decision making?

Answer 21

slow process
lack creativity
fail to lead innovative approach
data can be unreliable
can be costly

Question 22

5 what is the marketing model?

Answer 22

example of how principles of scientific decision making can be applied to marketing decisions
applied in general to assist managers in planning and executing strategy

Question 23

5 what are decisions made on intuition

Answer 23

made on a hunch, or gut feeling

Question 24

5 what are the main forms of intuition decision

Answer 24

hunch
brain-storming
delphi-oracle technique

Question 25

5 what is a hunch

Answer 25

a managers gut feeling, intuition can be based on experience or spotting solutions

Question 26

5 what is brain-storming

Answer 26

a group of people with different specialisms making a team decision

Question 27

5 what is delphi-oracle technique

Answer 27

asking an expert in a particular field to make a recommendation

Question 28

5 why are intuition decisions good

Answer 28

used by small firms
experience allows this to be effective
quick decision making
more qualitative than quantitative
can be ill judged sometimes

Question 29

5 advantages of intuition decisions

Answer 29

cheaper
saves time
data in scientific could be biased or old
managers can use experts

Question 30

5 disadvantages of intuition decisions

Answer 30

no hard evidence
could be bias
lack of skills from manager
big decisions are risky

Question 31

5 what other factors influence decision making

Answer 31

risks
rewards
uncertainty
opportunity cost

Question 32

5 what is risks

Answer 32

all decision involve elements of risk and firms will have different views about how much risk they are willing to take

Question 33

5 what are rewards

Answer 33

decisions are usually in expectation of increased market share/ revenue/ profit/ efficiency etc. scale of reward should be considered

Question 34

5 what is uncertainty

Answer 34

not all information is present and there may be external factors that cannot predict the impact on the success

Question 35

5 what is opportunity cost

Answer 35

the benefit forgone for the next best alternative
have to consider what you have forgone as a result, not always a financial cost

Question 36

5 why is opportunity cost important

Answer 36

when resources are limited
make crucial decisions about where to spend money
take calculated risks and weigh up implications of it to decide what to do

Question 37

5 what is a decision tree

Answer 37

mathematical model that help decisions
estimates probabilities
net gain is worthwhile
different outcomes displayed

Question 38

5 advantages of decision trees

Answer 38

shows problem clearly and logically
full consideration
quantitative approach, computerised
risk and reward accounted for
used when similar scenarios occur
routine decisions, not strategic ones

Question 39

5 disadvantages of decision trees

Answer 39

ignore change in business nature
difficult to get accurate due to real data
management bias can influence
less useful for new decisions
some subjective elements, not just data
focus too much on financial return