Understanding management and decision making

Question 1

Scientific Decision

Answer 1

All business decisions involve some uncertainty. However businesses and managers increasingly want to reduce that uncertainty and risk by applying logic to decision-making, supported by relevant data.

Scientific decision-making involves the use of:

Data mining and big data to source relevant data to inform decisions
Application of software logic and predictive models to analyse scenarios
Forecasts to consider the possible implications of business decisions

Question 2

Hunch

Answer 2

refers to the use of “gut feeling” to make decisions rather than rely on a more scientific approach using data and other quantitative evidence, supported by logical, rational decision-making models.

Question 3

Decision Trees

Answer 3

A decision tree is a mathematical model used to help managers make decisions.

A decision tree uses estimates and probabilities to calculate likely outcomes.
A decision tree helps to decide whether the net gain from a decision is worthwhile.

Question 4

Influences on decision making

Answer 4

Business Objectives
Organisational Structure - Who makes the decisions
Attitude to risk
Availability and reliability of data
External Environment