Chapter 11- decision making and conflicts in decision making Flashcards
In the process of decision making, what skills will be involved?
- identifying the options available
- consultation and taking advice
- use of decision making tools
- clear vision
- commitment and firmness in carrying the decision through
- effective implementation
For decision making to be a successful process what will need to occur?
- those making decisions need to be supported
- important that decisions are not made in an atmosphere of fear and criticism
What ways can the success of the decision making process be measured?
- it could be reference to financial information or labour turnover or productivity
What are the different types of decisions made in business?
- Strategic decisions (long term decisions affecting the whole of the business)
- taken at board or senior management level
- could include a decision about growth of the business or diversification - Tactical decisions (medium-term decisions affecting a particular department)
- taken by middle management
- example would be making a decison to increase the training given to a particular group of workers - Operational decisions (those taken on a day-day basis)
- taken by managers of departments
- an example would be moving personnel to different jobs on a production line or in a supermarket
What is one of the easiest ways to begin a decision making proces?
- to look at and weigh the pros and cons of the change
Decision making tools
- some of the tools may be financial
- some decision making tools are quantitative (use numerical information) and others are qualitative (based on non-numerical data)
E.g.
. SWOT analysis (qualitative)
. Financial accounts of the business (quantitative)
. Financial information on the state of the local, national and international economy (quantitative)
. Market research information (qualitative and quantitative)
. PEST analysis (qualitative)
. Porters five forces (qualitative)
. Advice from consultants (qualitative and quantitative)
. Brainstorming or running a workshop (qualitative and quantitative)
. Help from business advisors (qualitative and quantitative)
. Decison trees (quantitative)
. Time series analysis (quantitative)
What will the business need to take into account when using any of the decison making tools?
- risk
- bias
- accuracy of forecasting
Looking at too much information will confuse the issue making it almost impossible to reach an effective decision
Mangers may also decide to ignore the information if they believe a particular course of action is desirable
If a business decides to make its main objective growth what tools would be used to aid its deciosn making ?
- SWOT analysis to see where the businesses strengths and weaknesses are and what the threats and opportunities may be
- bank business advisors to recommend credit or loans
- time series analysis to forecast sales
- market research to find out if there is sufficient demand in the market
Ansoffs matrix
- it is a strategic tool used to help a business that wishes to grow
- Igor Ansoff was interested in ways by which business could identify their competitive advantage in existing and new markets
- the matrix looks at the businesses markets in terms of existing and new products and existing and new market opportunities
- it defines 4 possible strategies for growth
1. Market penetration
2. Market development
3. Product development
4. Diversification
Market penetration
- situation where the firm tries to sell more of its existing product in its existing market
- to achieve this the business may need to use more aggressive promotion or it may need to price its product more competitively
Market development
- this involves selling the existing product to a new market segment
- careful market research will be required in the first instance to identify possible markets
The business then needs to ensure that it prices and promotes the product with the new markets in mind
Product development
- changes are made to the existing product but it continues to sell in the same market
- might involve new packaging, new flavours or new formulation for the product
Diversification
- entails selling a new product in a new market
- high risk strategy for any business
- thorough market research will be needed so that the firm is aware of any threats that might exist particularly in the form of competition
Ansoffs matrix in practice
- it makes it possible for the business to identify how it wants its market to grow and to formulate a strategy
- business will need to ensure that the new product range meets the needs of the market at a price that consumers are willing to pay
- promotion will also be needed to create awareness of the new range among potential customers
- strategy will be based around price, promotion and product
- the extent to which Ansoffs matrix will be useful to a business will depend on the nature of the business and the market it is operating in
Conflicts in decision making
- process of decision making may create problems for a business if the information acquired from different sources is conflicting
- one decison making tool may suggest one course of action while others disagree
- the final decison will then come down to the managers judgement
Why may conflicts in reaching decisions arise?
- information gathered might not reflect reality
- factors like customer satisfaction and staff morale are almost impossible to quantify and may provide unexpected in the face of change
- when complex research is undertaken by experts it may prove inaccurate because the experts have little knowledge of the reality of the situation, or the problems faced by management in the business world
But good research used fro decison making can be very useful
Use of sophisticated computer modelling, allowing the decision maker to look at different scenarios can be used very effectively
Stakeholder and decisions
Result of a particular decison may be viewed differently by different groups of stakeholders
Conflict may arise due to
- shareholders will be interested in profits and dividends
- customers will want quality, reliability, low prices and good customer service
- employees and unions may also want to see increased profits if it means better pay and more jobs
- local community might be interested in decisions for the firms to grow if it means more jobs
- environmental groups will be happy to see ‘grener’ production methods but shareholders might object if they cause costs to rise in the short term
