Management decision making Flashcards
What is scientific decision making?
Making decisions based on data.
What are advantages of scientific decision making?
Using data reduces risk
Structured approach which leads to more consistent decisions
What are disadvantages of scientific decision making?
Collecting data is time-consuming
Data may be inaccurate or out-of-date
What is intuitive decision making?
Making decisions based on your gut feeling or personal experience.
What are advantages of intuitive decision making?
Faster than gathering data
Useful in emergencies where quick action is needed
What are disadvantages of intuitive decision making?
Can be risky
Decisions made may be illogical
What are 3 things managers take into account when making decisions?
Risk
Reward
Uncertainty
What is opportunity cost?
The next best alternative you give up when making a choice.
What other factors are considered by managers?
Mission and objectives
Ethics
External environment
Resource constraints
How to calculate Expected value?
EV = (probability 1 x outcome 1) + (probability 2 x outcome 2).
How to calculate net gain?
EV - Initial costs.
What are advantages of decision trees?
Easy to understand and interpret
Compares options quantitatively rather than being opinion-based
What are disadvantages of decision trees?
Probabilities are hard to predict accurately
Doesn’t guarantee success
