3.2.2- Understanding management decision making

Question 1

What is scientific decision making?

Answer 1

Process of setting objectives, collecting data, analyse data, make decision, implement decisions, review decisions

Question 2

What are the strengths of scientific decision making?

Answer 2

• Can reduce bias
• Reduces risk
• Success is more probable as decisions are based on rational thinking

Question 3

What are the weaknesses of scientic decision making?

Answer 3

• Costly and time consuming
• Need to make sure data is up to date or unreliable

Question 4

What is intuitive decision making?

Answer 4

Making decisions based on hunch/gut instincts.

Question 5

What are the strengths of intuitive decision making?

Answer 5

• Quick and easy

Question 6

What are the weaknesses of intuitive decision making?

Answer 6

• Can be risky and mistakes made

Question 7

How does risk, reward, and uncertainty influence decision?

Answer 7

• Risk: All businesses take risks, some can be high risk but high rewards. Businesses reduce risks with scientific decision making.
• Reward: Managers expect decisions to bring rewards. Can be financial (profits) or beneficial in other ways (high productivity)
• Uncertainty: Sometimes no one knows the outcome of a decision, cannot predict everything.

Question 8

What are the main factors of opportunity costs?

Answer 8

• Opportunity cost is the benefits given up in order to do something
• Idea that money or time spent doing something means missing out on doing something else
• Puts value on product or business decision
• O.C is the value if the next best alternative that been given up

Question 9

What are the factors that businesses need to consider when making decisions?

Answer 9

• Mission: All decisions take mission into account
• Objectives: Decisions will be made to achieve objectives and reviewed against objectives
• Ethics: Moral values effect decisions
• External environment: Competition, trends, economy, environment affect decisions
• Resource constraints: Resource availability (money. people, time, material) affect decisions.

Question 10

What are decision trees used for?

Answer 10

They outline the possible outcomes for each course of action with probabilities

Question 11

What are the advantages of decisions trees?

Answer 11

• Give a visual representation
• Allows managers to compare options quantitatively and objectively
• Useful in familiar situations, where businesses with experience can make accurate estimates

Question 12

What are the disadvantages of decision trees?

Answer 12

• In reality theres a wider range or potential outcomes
• Probabilities are hard to predict accurately