Managers, Leadership and decision making- 2.2

Question 1

What is decision making based on data?

Answer 1

-A scientific approach
- Setting objectives
- Developing and identifying alternatives
-Managers understanding the environment they operate in

Question 2

What is a disadvantage of making decisions based on data? (Scientific)

Answer 2

-Expensive to collect
-Data may not always be reliable

Question 3

What is decision making based on intuition?

Answer 3

-Making decisions based on instinct
- Used when data is less likely to be available or needs a quick decision

Question 4

What is a decision tree?

Answer 4

Model that represents likely outcomes for a business of a number of courses of actions and the consequences of these actions.

Question 5

What is the expected value and how do we calculate it?

Answer 5

Weighted average of the outcomes taking the probability into account.

-EV=(probability 1 X outcome 1) + (probability 2 X outcome 2)

Question 6

What is a net gain?

Answer 6

Expected values of a course of action minus costs associated with it. (outcomes)

Question 7

What is decision making?

Answer 7

Selecting a logical choice from options available. Involves setting objectives, gathering and interpreting information, selecting chosen option, implementing and reviewing the decision.

Question 8

What is opportunity cost?

Answer 8

The best option a managers gives up in making a decision. The next best alternative.

Question 9

Why are decision trees useful for making decisions?

Answer 9

-Managers think about different options and consider consequences for them
-Logical, less rushed process
-See impact of each decision considering forecast costs, benefits and probabilities

Question 10

Why are decision trees not useful when making a decision?

Answer 10

-Only includes financial data, doesn’t include quantitative data such as workforces reaction to decision
-Decision trees use estimates of probability meaning manipulation by managers can occur

Question 11

What are the influences on decision making including the mission and objectives of the firm?

Answer 11

• A mission sets out a purpose and it’s appropriate to consider decisions against this
• Objectives are time-related targets and can affect decisions

Question 12

What are the influences on decision making including ethics and the external environment?

Answer 12

• Ethics provide a moral guideline
• Changes in the external environment (incomes, interest rates and demographic factors) may lead to delayed or changed decisions

Question 13

What are the influences on decision making including resource constraints?

Answer 13

• Need resources such as information, time, labour and materials
  -The amount of resources to be invested can affect the outcome