Decision Making Flashcards
What is opportunity cost?
The loss of other alternatives when a decision is made
What are the reasons for risk?
1) factors beyond control
2) imperfect knowledge
What are the two types of risk?
1) pure risk
2) speculative risk
What is pure risk?
Risk that is beyond a business’ control
What is speculative risk?
Still a type of risk but some factors of it can be controlled
What does Porter’s five forces analysis aim to do?
Analyses the level of competition in the market
What are the five forces in Porter’s five forces model?
Rivalry among competitors Bargaining power of suppliers Bargaining power of buyers Threat of new entrants Threat of substitutes
What are the three types of decision that can be made in business?
Strategic decisions
Tactical decisions
Operational decisions
What are strategic decisions?
Long term decisions affecting the whole of the business
What are tactical decisions?
Medium term decisions affecting a particular part of the business
What are operational decisions?
Short term decisions made on a day to day basis
What is uncertainty?
The inability to calculate the costs and benefits of a decision precisely
What is risk?
The possibility of an adverse occurrence
What is reward?
The possible return that a particular activity may have
