Chapter 5

Question 1

Managing is all about making decisions – making the RIGHT decision about resources like:

Answer 1

People
Money
Materials needed
Machinery

Question 2

Decision-making for managers is all about

Answer 2

minimizing risk but maximizing rewards

Question 3

Decision making risks

Answer 3

Finances – could lose money or not make as much money as manager thought
Reputation – could damage reputation of business/manager
People – could lose good staff if not successful; demotivate staff
Future – could influence future decisions
Resources – resources not used effectively (either over- or under-utilised)

Question 4

Decision making rewards

Answer 4

Finances – could make more money that anticipated
Reputation – could enhance reputation of business/manager
People – could attract good staff in future; motivate staff
Future – could get future business from potential customers

Question 5

Decision making can be based on 3 assumptions

Answer 5

Data
Experience
Hunch or got a feeling

Question 6

Sceintidic deciosn making process

Answer 6

Set objectives
gather data
analyse data
select a plan
implementation
review

Question 7

Benefits of using scientific approach

Answer 7

Clear direction by emphasising objectives and getting people involved in the decision-making process
Decisions based on logic and rational thinking
More people are involved in the decision-making process
Flexible because at any stage the decision can be reviewed and altered accordingly
Easier to defend a decision based on logic

Question 8

Expected value calculation

Answer 8

Expected value = (probability 1 x outcome 1) + (probability 2 x outcome 2) + ……BRACKETS MEAN MINUS

Question 9

Value of decision trees

Answer 9

Decision trees are a part of the scientific decision-making process
They analyse the data, making is easier to make decisions
The visual nature of the diagram makes it easier to understand complex information
Makes managers think about different options and their possible consequences
Helps to establish a logic order to options

Question 10

Limitations of decision trees

Answer 10

Only uses estimates of the probability of different outcomes and the financial consequences of each outcome
The value of decision tree analysis depends heavily upon how accurate these estimates are
Only includes financial and quantifiable data – they do not utilise qualitative data and this is sometimes more important!!!!

Question 11

dIFFERNT APPROACHES

Answer 11

The approach also depends upon different industries and the size of the organisation. Smaller entrepreneurial businesses tend to go more on hunches – possibly because they do not have the resources or skills to be able to analyse too deeply!