Understanding management decision making Flashcards

1
Q

What are potential risks that good management must weigh up?

A

Lack of sales
Higher costs than expected
Projects not being completed on time
More competition

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2
Q

How to work out expected value

A

Multiply probalility of each outcome by its expected value and add them together

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3
Q

How to work out net gain

A

Expected value - Initial cost of a given choice

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4
Q

What is opportunity cost?

A

The value of one decision against what could have been gained by taking the next best decision

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5
Q

What are influences on decision making?

A

Needs to fit into:
Mission - does it follow the way the business operates as a whole?
Objectives -will it help meet its short-term and long-term objectives, and will it impact negatively on other objectives in other areas of the business?
Ethics - will the decision be morally wrong in the eyes of the stakeholders, for example, sourcing materials from countries with a poor record on human rights or working conditions?
External factors - PESTLE
Resource constraints:
Employees, present and future - and their qualities
Suppliers
Transport
Finance - does the business have access to the cash it needs to implement the initial plan?

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6
Q

Define opportunity cost

A

The benefit foregone of the next best alternative

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