Chapter 2: Decision making Flashcards
Midterms reviewer
TRUE OR FALSE:
The higher the management level is, the bigger and more complicated decision making becomes:
True
According to William G. Nickels, it is “the heart of all management functions”
Decision making
Steps of decision making process according to David H. Holt
- Diagnose Problem
- Analyze Environment
- Articulate Problem or Opportunity
- Develop Viable Alternatives
- Evaluate alternatives
- Make a choice
- Implement Decision
- Evaluate and adapt decision results
“The process of identifying and choosing alternative course of action in a manner appropriate to the demands of the situation”
Decision making
The various management levels (3)
Top
Middle
Lower
A ____ exists whene there is a difference between an actual situation and a desired situation”
Problem
Components of Environment
Internal
External
Refers to organizational activities within a firm that surrounds decision making
Internal Environment
Refers to variables that are outside the organization and not typically within the short run control of management
External Environment
The benefits that can be expected in an alternative solution
Value of the alternatives
Refers to out-of-pocket costs, opportunity costs and follow-on costs of an alternative
Cost of the alternative
The likelihood of achieving the goals of the alternative.
Risk characteristic
The process of selecting alternatives representing potential solutions to a problem
Choice making
After a decision has been made, ______________ follows
Implementation
Refers to carrying out the decision so that the objectives sought will be achieved.
Implementation
To make implementation effective, a _____ plan must be devised.
Plan
Refers to the process which requires checking at each stage of the process to assure that alternatives generated, the criteria used in evaluation, and the solution selected for implementation are in keeping with the goals and objectives originally specified.
Feedback
Refers to actions made to ensure that activities performed match thee desired activities or goals, has been set
Control
The manage uses _______ and ______ mechanism to ensure results and to provide information for future decision.
Control and feedback
Approaches in evaluations / solving problems
Qualitative evaluation
Quantitative evaluation
Refers to evaluation of alternatives using intuition and subjective judgment.
Qualitative evaluation
True or False:
William J. Stevenson states that managers tend to use the qualitative approach when:
1. the problem is simple
2. The problem is familiar
3. The costs are not great
4. Immediate decisions are needed
True
Refers to the evaluation of alternatives using any technique in a group classified as rational and analytical
Qualitative Evaluation
Quantitative Models for decision making
- Inventory models
2.Queuing Theory - Network models
- Forecasting
- Regression analysis
- Simulation
- Linear programming
- Sampling Theory
- Statistical decision theory
Types of Inventory models
Economic order quantity model
Production order quantity model
Back order Quantity model
Quantity discount model
Inventory model used to calculate the number of items that should be ordered at one time to minimize the total yearly cost
Economic order quantity model
Economic order quantity technique applied to production order
Production order quantity model
Inventory model used for planned shortages
Back order inventory model
Inventory model used to minimize the total cost when quantity discount are offered by suppliers
Quantity discount model
The decision making theory that describes how to determine the number of service units that will minimize both costumer waiting time and cost of service
Queuing theory
Decision making models where large complex tasks are broken into smaller segments
Network models
Network model that enables engineer managers to schedule, monitor and control large complex projects by employing three time estimates for each activity
Program Evaluation Review Technique (PERT)
Network model that enables engineer managers to schedule, monitor and control large complex projects by employing one time factor for each activity
Critical Path Method (CPM)
Defined as “the collection of past and current information to make predictions about the future”
Forecasting
A forecasting method that examines the association between two or more variables.
Regression analysis
A regression analysis with one independent variable
Simple regression
A regression analysis with two or more independent variables
Multiple regression
A model constructed to represent reality on which conclusions about real-life problems can be used
Simulation
TRUE or FALSE: Simulation guarantees an optimum solution.
False
Quantitative techniques used to produce and optimum solution within the bounds imposed by constraints upon the decision
Linear programming
Quantitative technique where samples of populations are statistically determined to be used for a number of processes, such as quality control and marketing research
Sampling theory
Quantitative technique that refers to the “rational way to conceptualize, analyse, and solve problems in situations involving limited, or partial information about the decision environment.
Decision theory
” To revise and update the initial assessments of the event probabilities generated by the alternative solutions.”
Bayesian analysis
The criterion that selects the decision alternative having the maximum expected payoff or the minimum expected loss if he is working with a loss table
Bayes criterion
