Unit 2: Understanding management leadership and decision making 2

Question 1

what is the order of the decision making process?

Answer 1

1. setting objectives
2. gathering information
3. selecting the chosen option
4. implementing the decision
5. reviewing

Question 2

what are the types of decisions?

Answer 2

1. programmed and non programmed
2. tactical and strategic

Question 3

what are programmed decisions

Answer 3

• Deals with familiar problems: information needed to solve problems is easy to obtain
  e.g. reordering raw materials is a job done often and requires less thought

Question 4

what are non-programmed decisions

Answer 4

Situations that are unstructured and require a unique solution
e.g. a risky investment

Question 5

what are strategic decisions?

Answer 5

• Involve a major commitment of resources
• Long term and difficult to reverse (permanent)

Question 6

what are tactical decisions?

Answer 6

• Short term, taken regularly
• Involve few resources

Question 7

define risk

Answer 7

chance of incurring misfortune or loss

Question 8

define rewards

Answer 8

the benefits received from a decision

Question 8

define uncertainty

Answer 8

unknown outcomes and consequences

Question 9

define opportunity cost

Answer 9

next best alternative foregone

Question 10

what does a manager do before making a decision?

Answer 10

gathers data and analyses it.

Question 11

what does a manager’s data analysis process involve?

Answer 11

• Recognising that there is a problem or opportunity
• Setting objectives for what you want to achieve
• Setting criteria and deciding the importance of each
• Developing, identifying, comparing and analysing the alternatives
• Choosing and implementing a course of action
• Reviewing the effectiveness of the decision

Question 12

when is it appropriate for a manager to rely on their instinct when making a decision?

Answer 12

• There’s more uncertainty about a decision - insufficient or unreliable data
• Decision making includes an assessment of a potential business partners character or personality
• If an advertising campaign will grab the attention of customers
• A quick decision is needed - limited research time

Question 13

what is a decision tree

Answer 13

a mathematical model which helps managers to make decisions

Question 14

draw the shape of a decision tree

Answer 14

insert image - dont have premium eesh

Question 15

what is on the bottom line of every decision tree?

Answer 15

the ‘do nothing’ branch

Question 16

what will make the decision tree more useful for managers?

Answer 16

when it says how likely each outcome will ouccur

Question 17

define probability

Answer 17

the likelihood of something happening

Question 18

what does the following probabilities mean:
0 -
0.5 -
1 -

Answer 18

0 - NO chance of the event happening
0.5 - 50% chance of the event happening
1 - the event will definitely happen

Question 19

what must all probabilities add up to?

Answer 19

1

Question 20

define expected values

Answer 20

the probability of the outcome occurring, multiplied by the pay-off the business can expect to get

Question 21

define net gain

Answer 21

the financial gain after initial costs of the decision have been subtracted