mr sims - topic 2; understanding management decsion making Flashcards
tactical decision making
immediate/ shot term; made by the middle management
operational decision making
relate to the day to day running of the business. taken by middle or junior managers
strategic decision making
long term, affect and shape the direction of the whole business made by senior managers
scientific decision making and what is the steps
tires to take the art out business decision making- placing intuition with facts and quantitative forecasts
1) set objective
2) collect data
3) analyse data
4) review decision
5) implement decision
6) make decisions
all decisions are made with a consideration of…
risk - business do need to take some risks, higher the risk = higher rewards if done successfully
reward - managers expect decisions to bring rewards, rewards can be financial or benefitting the business e.g. higher productivity
uncertainty - decisions involve in some level of uncertainty- not sure of the outcome of the decision will be, can’t predict everything - scientific approach will help to reduce uncertainty
what are the influences on decision making
1) production
2) competitive market
3) mission
4) objective
5) beliefs values
6) ethics
7) resources constraint
what are decision trees
it is a strategy to help to discuss the importance in decision such as choices, opportunity costs, probability and risk, costs and returns, net gains, expected out come and forecasting
how can decision trees help people to pitch their ideas and persuade people to think that its the right idea
1) the value of the tree- its getting managers to think through their options, probability of different outcomes and the financial consequences
2) extent to which the financial consequences accurately estimated- can see out of two choices which is better with the best measured in financial terms
3) issues- it can raised initial finance, impact of ethics and the impact on shareholders
what are the advantages
allows for uncertainty
consider all possible alternative outcomes
set out problems clearly and encourage a logical order
quantitative approach
shows the expected value
useful when similar scenarios have happened before
more useful in-tactical rather strategic decision
what are the disadvantage
can be biased
difficult to find meaning full data
easy for the managers seeking to prove a cause to manipulate data
decision trees do not take into account the variability of the business environment
may divert managers from the need to take into account qualitative as well as quantitative decisions
what does it mean by opportunity costs
the cost of missing out on the next best alternative when making a decision
businesses must choose where to use their limited resources. mangers compare opportunity costs when making decisions.
what does it mean by trade off
is a situation that involves losing one quality or aspect of something in return for gaining another quality or aspect
managers have to consider other factors as well
1) mission - what’s the overall business mission/ aim - this will influence what decisions that will need to take place
2) businesses objectives - objectives - medium - long targets they help the business to achieve it mission - decisions will be made with the aim of achieving the objectives, and are reviewed against the objective to measure success
3) ethics - firms ethics have an affect too e.g. business may not want to change to a cheaper supplier because it will go against their ethics, e.g. fair trade products
3) external environment - things such as trends, competition, seasonal demand can effect the decisions that need to be made
4) resource constraints - the resource availability these include, money, people, time, raw materials
