Decision-making Flashcards
What are the three types of decisions?
- strategic
- tactical
- operational
Strategic
Length of decision,
Decision maker,
Purpose,
Risk?
Length of decision- long term
Decision maker- senior managers
Purpose- to meet the overall purpose and direction of the organisation e.g. to grow the business
Risk- high
Tactical
Length of decision,
Decision maker,
Purpose,
Risk?
Length of decision- medium term
Decision maker- middle managers
Purpose- to achieve the strategic decisions e.g. launch new products to grow organically
Risk- medium
Operational
Length of decision,
Decision maker,
Purpose,
Risk?
Length of decision- short term, day to day
Decision maker- supervisors/all staff
Purpose- to react to situations as they arise e.g. dealing with a customer complaint
Risk- low
What is centralised decision making and what are advantages and disadvantages of it?
-Centralised decision making is when most decisions are taken by senior managers or the head office.
Advantages
- decisions made by the most experienced people
- decisions made more quickly
- lead to greater uniformity within the organisation
Disadvantages
- staff demotivated from lack of input in decisions
- central team slower to respond to local changes in market
What is decentralised decision making and what are advantages and disadvantages of it?
-Decentralised decision making is when each department within the organisation has the authority to make their own decisions.
Advantages
- staff motivated by opportunity to make decisions and be creative
- local teams can respond quickly to changes in local market
- can provide better level of customer service
Disadvantages
- decisions made by less experienced people
- local decisions may be inconsistent with overall strategy
What is SWOT analysis ?
- an organisation can use a structured decision-making model known as a SWOT analysis
- this allows it to look at its internal (inside the organisation) strengths and weaknesses as well as external (outside the organisation) opportunities and threats
- A SWOT analysis is often laid out in a grid for easy comparison of the organisations position and to allow an informed decision to be made about future actions
Strengths are things the organisation is good at, this could be:
- availability of finance
- well-known brands of products
- good services that make the most profits -products are ‘benchmarks’ in the market which competitors try to copy
- assets the business owns, such as large modern factory, modern technology or a retail outlet in a prime location
- high-quality staff and good staff morale
Weaknesses are things the organisation is ineffective at, these could be:
- lack of finance
- lack of technology
- poor customer service reputation
- faulty products
- products or branches that are making losses
- assets that are in a state of disrepair, such as a crumbling factory or ageing fleet
- untrained staff or low staff morale 
Opportunities are the possible chances a business could take that arise due to something happening outside the organisations control, these might be:
- A competitor going bust, so the business could take on its customers
- A boom period in the economy that the business could exploit
- customer tastes and fashions falling in line with an organisation specialism
- governments introducing favourable legalisation
- advancements in technology that the business could exploit for example, e-commerce
Threats are things that might impact on a business achieving its aims or making positive decisions, these may be:
- competitors actions such as cheaper prices are better quality products
- A downturn in the economy such as a recession
- customer tastes and fashions changing away from those the business specialises in
- governments introducing legalisation that impact badly on the organisation
- advancements in technology that could leave the business behind its rivals
What are advantages and disadvantages of using SWOT analysis?
advantages of using SWOT
- identify strengths and allows a business to build upon them
- identifies weaknesses and allows them to be addressed
- identifies opportunities and allows them to be exploited
- Identify threats and allows them to be turned into opportunities, eg embracing advancing technology, not allowing it to leave the business behind
- time is taken to analyse the business’s current position so no rash decisions are made
Disadvantages
- A SWOT analysis is very time-consuming which can slow down decision-making
- A SWOT analysis is a very structured process which can stifle creativity and gut reactions from managers
- A SWOT analysis can generate many ideas however, it doesn’t help pick the correct one
- A SWOT analysis produces a result that reflects the opinions of those who carry it out which could lead to bias
- A SWOT analysis considers information that is available at a particular moment and may become outdated quickly
What are the Factors affecting the quality of decisions
Organisations often face of variety of issues when making decisions. There are many internal factors that can affect the quality of decision-making.
- human resources
- availability of finance
- technology
- other factors
The human resources, people within the organisation can affect decision-making in the following ways:
- managers ability, training and experience to make good decisions
- how much risk the managers will take when making decisions
- staff resistance to change
- managers ability to handle stressful and complex situations
- the likelihood of overpowering managing directors or owners overturning decisions made by middle management
Availability of finance,
Whether or not the organisation has or can get hold of finance can impact on decision-making in the following ways:
- whether finance is available to exploit the opportunities, address weakness or build on strengths
- financial constraints may mean an organisation cannot choose the best solution to a problem