Section Two - Management and Decision Making - Management Decision Making Flashcards
Fill in the blanks for how the scientific decision making works.
What is an advantage of scientific decision making?
Making decisions based on data reduces the risk of making expensive mistakes. It is a logical and structured approach which can be adapted if necessary - for example, having analysed the data, you might review the objectives, and change them if needed.
What are disadvantages of scientific decision making?
However, it can be costly and time-consuming because it involves collecting and analysing a lot of data.
It also takes away the ‘human element’ so may be less creative or original than a decision based on intuition.
4) You also need to make sure you have reliable, up-to-date data.
Decisions based on biased or out-of-date data will be unreliable.
What is intuitive decision making?
1) Intuitive decision making means making decisions based on a hunch or gut instinct. Some managers have good intuition - because they’re experienced.
What is an advantage of intuition?
Decisions based on intuition can be made quickly - you don’t have to spend time collecting and analysing data. If the situation is new or unfamiliar, using data might not be helpful (or there might not be any data available), so managers have to use their intuition.
What is a disadvantage of intuition?
4) It’s risky to rely on intuition all the time though, because people can make mistakes.
Decisions made using gut instinct can be irrational or not based on logical reasons.
Explain how risk influences decisions
All businesses have to take some risks. Some decisions can be high risk, but if they are successful bring high rewards. Businesses often try to reduce risk - scientific decision making can help with this.
Explain how reward influences decisions
Managers expect decisions to bring rewards (otherwise there’d be no point implementing that decision). Rewards can be financial (e.g. higher sales or profits) or beneficial in other ways (e.g. higher productivity or lower staff turnover).
How does uncertainty influence decisions?
All business decisions involve some degree of uncertainty - no one knows for sure what the outcome of a decision will be. Scientific decision making can help reduce uncertainty, but you can’t predict everything, so there will always be some uncertainty.
What is opportunity cost?
1) Opportunity cost is the benefit that’s given up in order to do something else
- it’s the cost of the choice that’s made.
What are other factors that managers have to consider in decision making?
- mission
- objectives
- ethics
- external environment
- resource constraints
How does a business’s mission influence decisions?
A business’s mission (its main purpose) will influence the decisions made. All decisions will take the mission into account.
How does a business’s objectives influence decisions?
The objectives are the medium- to long-term targets that help a business achieve its mission. Decisions will be made with the aim of achieving the objectives, and are reviewed against the objectives to measure their success.
How does a business’s ethics influence decisions?
The firm’s ethics (moral and social values) have an effect too.
E.g. a business might decide not to switch to a cheaper supplier if that supplier is less environmentally responsible than their current one.
How does a business’s external environment influence decisions?
The external environment is all the outside factors that affect a business.
It includes things like competition, trends (e.g. seasonal demand and supply), the economy of the area or whole country and environmental concerns. E.g. if a bakery lowers the price of their bread, the marketing manager in a rival bakery might decide to do the same to stay competitive.
