Business objectives and strategy - decision trees Flashcards
1
Q
how can managers make decisions?
A
- based on hunches - gut instincts
- based on experience - past decisions
- scientific decision making - using data (quantifiable)
2
Q
what is a decision tree?
A
a mathematical model used to help managers make decisions when faced with choices (quantifiable)
3
Q
what are the benefits of decision trees?
A
- managers can analyse possible options and identify opportunity costs –> quantitative data
- forces managers to inject quantifiable analysis into the decision making process (rather than just relying on qualitative info)
- useful to managers when business has encountered similar situations have been faced
4
Q
what are the disadvantages of decision trees?
A
- accuracy of estimates (affected by external environment, accuracy questioned)
- manager bias (managers pitching ideas have interest in success could manipulate data)
- less useful when business is facing a new situation
- may lead to qualitative data being ignored