Component 2 - Decision-making models Flashcards
Explain : The types of decisions a business makes including
; Strategic
Strategic decisions are Long-term and decide the overall direction of the business.
For example
- entering a new market
- Acquiring another company.
Strategic decisions are made by top-level management and have a significant impact on the overall success of the business.
Explain : The types of decisions a business makes including
; Tactical
Tactical decisions - Medium-term and concern the implementation of strategy.
For example
- Setting sales targets
- Deciding on product pricing
- Allocating marketing budgets.
Made by middle management and help to implement the overall strategy of the business.
Explain : The types of decisions a business makes including
; Operational
Operational decisions - Short-term and concern the day-to-day running of the business.
For example
- Scheduling production
- Ordering raw material
- Allocating resources.
Made by lower-level management and are critical for the efficient running of the business.
Explain : Why is correct decision making crucial to a business?
Decision-making is crucial to a business as it
determines the direction and success of the organisation.
Explain : The Four types of Scientific decision making + what is its purpose
Scientific - Methods such as
- SWOT analysis
- Porter’s Five Forces
- Ansoff Matrix
- cost-benefit analysis
provide a structured and systematic approach to decision-making.
Explain : What is intuitive Decision making
Intuitive - Rely on the personal experiences and instincts of decision-makers.
This type of decision-making can be useful in situations where data and analysis are not available or when quick decisions are needed.
However, relying solely on intuition can sometimes lead to bias and error in decision-making.
Explain : The nature and purpose of decision tree analysis
commenting on the benefits and limitations of the technique
Benefits - Helps to structure complex problems, making it easier for decision-makers to understand and consider all possible outcomes. .
Limitations - Determining the probabilities of different outcomes, which can be difficult to quantify accurately. This can lead to incorrect decisions if the assumptions are incorrect.
Explain : Construct decision trees, interpret and evaluate the results
Do on paper
Explain : The nature and purpose of critical path analysis (CPA),
commenting on the benefits and limitations of the technique
Critical Path Analysis (CPA) - A Tool that is used to analyse and represent the sequence of tasks involved in a project, along with the estimated time required to complete each task.
The purpose is to determine the minimum amount of time required to complete a project and to identify any delay the projects completion.
Benefits
1) Improved planning and scheduling
2) Better resource allocation
Limitations
1) Complexity:
2) Time Consuming
Explain : The nature and purpose of cost benefit analysis (CBA),
commenting on the benefits and limitations of the technique
Cost-Benefit Analysis (CBA) - This technique involves identifying all relevant costs and benefits, and then making a comparison to determine whether the benefits outweigh the costs.
The benefits
1) Helps to identify the full range of costs and benefits associated with
a project
2) Provides a clear and objective way to compare and evaluate
different options
Limitations
1) Difficulty in accurately predicting costs and benefits in the future
2) Difficulty in quantifying non-monetary benefits and costs
Explain : Carry out cost benefit analysis,
interpret and evaluate the results”
1) Identify the costs and benefits of the project - Both tangible and
intangible costs and benefits. Tangible are easy to quantify, such as
direct expenses such as materials, labour, and overhead. Intangible,
such as quality of life improvements or environmental impact, are
more difficult to quantify.
2) Assign a monetary value to each cost and benefit: This may involve
estimating the cost of future expenses and benefits, or using market
prices for comparable projects.
3) Calculate the net present value (NPV) of the project: NPV is calculated
by subtracting the total costs from the total benefits, and adjusting
for the time value of money.
4) Interpret and evaluate the results : The NPV of the project provides a
quantitative measure of the financial feasibility of the project.
Positive NPV, indicates that the expected benefits of the project outweigh the costs, and the project should be considered a viable investment. Negative NPV, Means the project should be re-evaluated or rejected.
Explain : The key role played by information technology in business decision making
Information technology can support business through :
1)Providing access to relevant and timely data, 2)automate data analysis and reporting, 3)support data visualization and presentation,
This can help organizations to make informed decisions, based on accurate and up-to-date information.
