Unit 2.2 - Understanding management decision making

Question 1

Name the 5 stages in the process of decision making?

Answer 1

• Setting objectives
• Gathering and interpreting info
• Selecting the chosen option
• Implementing the decision
• Reviewing

Question 2

What is a programmed decision?

Answer 2

deal with problems that are familiar and where the information required to make them is easy to define and obtain

Question 3

What is a non-programmed decision?

Answer 3

deal with situations that are unstructured and unique

Question 4

What is a tactical decision?

Answer 4

short term, few resources involved, easier to reverse, usually taken by junior management

Question 5

What is a strategic decision?

Answer 5

long term, large commitment of resources, difficult to reverse and taken by senior managers

Question 6

What are problems in decision making?

Answer 6

• Cost of gathering and analysing the data
• Costs > return?
• Reliability

Question 7

When is decision making appropriate?

Answer 7

• There is 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 8

What is a decision making tree?

Answer 8

A mathematical model which can be used by managers to help them make the right decision

Question 9

What are the benefits if a decision making tree?

Answer 9

• Choices are set out in a logical way
• Potential options & choices are considered at the same time
• Use of probabilities enables the “risk” of the options to be addressed
• Likely costs are considered as well as potential benefits
• Easy to understand & tangible results

Question 10

What are the drawbacks of a decision making tree?

Answer 10

• Probabilities are just estimates – always prone to error
• Uses quantitative data only – ignores qualitative aspects of decisions
• Assignment of probabilities and expected values prone to bias
• Decision-making technique doesn’t necessarily reduce the amount of risk

Question 11

What influences decision making?

Answer 11

The business’s mission and objectives
Ethics
The risk involved
The external environment 
Resource constraints