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)
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2
Q

what is a decision tree?

A

a mathematical model used to help managers make decisions when faced with choices (quantifiable)

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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
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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
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