Unit 2: Understanding management leadership and decision making 2 Flashcards
what is the order of the decision making process?
- setting objectives
- gathering information
- selecting the chosen option
- implementing the decision
- reviewing
what are the types of decisions?
- programmed and non programmed
- tactical and strategic
what are programmed decisions
- 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
what are non-programmed decisions
Situations that are unstructured and require a unique solution
e.g. a risky investment
what are strategic decisions?
- Involve a major commitment of resources
- Long term and difficult to reverse (permanent)
what are tactical decisions?
- Short term, taken regularly
- Involve few resources
define risk
chance of incurring misfortune or loss
define rewards
the benefits received from a decision
define uncertainty
unknown outcomes and consequences
define opportunity cost
next best alternative foregone
what does a manager do before making a decision?
gathers data and analyses it.
what does a manager’s data analysis process involve?
- 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
when is it appropriate for a manager to rely on their instinct when making a decision?
- 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
what is a decision tree
a mathematical model which helps managers to make decisions
draw the shape of a decision tree
insert image - dont have premium eesh
what is on the bottom line of every decision tree?
the ‘do nothing’ branch
what will make the decision tree more useful for managers?
when it says how likely each outcome will ouccur
define probability
the likelihood of something happening
what does the following probabilities mean:
0 -
0.5 -
1 -
0 - NO chance of the event happening
0.5 - 50% chance of the event happening
1 - the event will definitely happen
what must all probabilities add up to?
1
define expected values
the probability of the outcome occurring, multiplied by the pay-off the business can expect to get
define net gain
the financial gain after initial costs of the decision have been subtracted