Decision making models Flashcards
Why do decision take place?
Decision making solves problems. Some stakeholders may experience a negative impact, but if a decision helps achieve the common goal of aims and objectives, it is deemed a success. All decisions involve risk because the outcomes can be affected by internal and external factors.
What is a strategic decision?
-Strategic decisions are long term and will affect the direction the business takes.
-These decisions will affect the entire business and will be made by the owners or senior management.
-They are often complex and may result in major organisational change, which could be internal to the business, in the market, or in new markets they operate in.
-Also involves a large financial commitment.
-Example- deciding to expand operations overseas, which is a costly and lengthy process.
What are tactical decisions?
Tactical decisions are not as far reaching as strategic decisions; they tend to be medium term.
-They are less complex and are usually carried out by middle management.
-More flexible; if the decision is failing to meet its objective then it can be changed.
-For example, a decision taken by a marketing manager to change the way a product is promoted.
What are operational decisions?
Operational decisions are the day to day decisions.
-They tend to be short term and have little risk.
-Made by junior managers, supervisors and employees.
-Hundreds of operational decisions will be made in a typical day, by a range of employees, as they do not need the careful thought and planning.
-Many decisions are routine and can be taken quickly.
-Example- the decision by a retail supervisor to schedule the break times of staff working on a shift.
What are scientific decisions?
Systematic use of facts and data to arrive at a logical and evidence-based decision.
Quantitative sales forecasting, decision trees and other methods.W
What does scientific decision making involve?
clearly identifying the objective/objectives or problem to solve, collecting all relevant information – this can include primary or secondary data, analysis of the information, making and implementing the decision, monitoring and reviewing the change.
Advantages of scientific decisions?
clear sense of direction, easier to defend an objective policy, monitoring decisions.D
Disadvantages of scientific decisions?
may put workers under stress of manager strictness, can be affected by external factors, data may not be accurate or free of bias.
What are intuitive decisions?
Uses experience and intuition (gut feeling) to make decisions.
Proved successful for many entrepreneurs.
Made quickly, often used for operational decisions.
Advantages of intuitive decisions.
quick and uses experience.
Disadvantages of intuitive decisions.
risky, subjective, can’t use past experience alone because the environment is always changing.
Why is decision making important?
-Once a decision is made, it is difficult to stop any processes that have been instigated.
-Decisions have far reaching implications.
-Wrong decisions can cause financial loss and ultimately result in business failure.
What is cost benefit analysis?
=A method that considers the financial feasibility of a project. Includes costs and benefits to the business and also the external costs and benefits. Often used by governments when contemplating public projects like new railways such as HS2.
What are private costs?
-Costs to the business making the investment. Training and recruitment, upfront costs, new equipment, marketing costs.
What are private benefits?
-Benefits that the business gains as a result of the investment.
-Increased productivity, increased sales, brand value and profits.
