Managerial Decision Making( Chapter 6)

Managerial Decision Making(Chapter 6)

1. Types of decisions

   • Decision: A choice made from available alternatives
     • Decision making: The process of identifying problems and opportunities and then resolving them
       • Certainty: the situation in which all the information the decision maker needs is fully available
         • Risk: A situation in which a decision has clear-cut goals and good information is available but the future outcomes associated with each alternative are subject to chance
           • Uncertainty: The situation that occurs when managers know which goals they wish to achieve, but information about alternatives and future events is incomplete
             • Ambiguitiy: A condition in which the goals to be achieved or the problem to be solved in unclear, alternatives are difficult to define, and information about outcomes is unavailable
   • Programmed decision: A decision made in response to a situation that has occurred often enough to enable decision rules to be developed and applied in the future
     • Nonprogrammed decision: A decision made in response to a situation that is unique, is poorly defined and largely unstructured, and has important consequences for the organization

2. Models

   • Classical Model: a decision-making model based on the assumption that managers should make decisions and provides guidelines for reaching an ideal outcome
     • Normative: An approach that defines how a decision maker should make decisions and provides guidelines for reaching an ideal outcome for the organization
       • Administrative model: A decision-making model that describes how managers actually make decisions in situations characterized by nonprogrammed decisions, uncertainty, and ambiguity
         • Descriptive: An approach that describes how managers actually make decisions rather than how they should make decisions according to a theoretical ideal.
           • Bounded rationality: The concept that people have the time and cognitive ability to process only a limited amount of information on which to base decisions
             • Satisficing: To choose the first solution alternative that satisfies minimal decision criteria, regardless of whether better solutions are presumed to exist
               • Intuition: The immediate comprehension of a decision situation based on past experience but without conscious thought
                 • Coalition: An informal alliance among managers who support a specific goal

3. Decision making steps

   • Problem: Situation in which organizational accomplishments have failed to meet established goals
     • Opportunity: A situation in which managers see potential organizational accomplishments that exceed current goals
       • Diagnosis: The step in the decision-making process in which managers analyze underlying causal factors associated with the decision situation
         • Risk propensity: The willingness to undertake risk with the opportunity of gaining an increased payoff
           • Implementation: THe step in the decision-making process that involves using managerial, administrative, and persuasive abilities to translate the chosen alternative into action
   • 1.- Recognition of decision requirement
     • 2.- Diagnosis and Analysis of causes
       • 3.- Development of alternatives
         • 4.- Selection of desired Alternative
           • 5.- Implementation of chosen alternative
             • 6.- Evaluation and feedback

4. Personal decision framework

   • Decision styles: Differences among people with respect to how thew percieve problems and make decisions
     • Directive style: one or two alternatives
       • Analytical style: Consider complex solutions based on as much data as they can gather
         • Coceptual Style: Consider a broad amount of information
           • Behavioral Style: Deep concern for others as individuals
   • Reasons for bad decisions
     • Being influenced by initial impresions
       • Justifying past decisions
         • Seeing what you want to see
           • Perpetuating the status quo
             • Being influenced by problem framing
               • Overconfidence
   • Brainstorming: a techiniue that uses a face-to-face group to spontaneously suggest a broad range of alternatives for decision making
     • electronic brainstorming: Bringing people together in an interactive group over a computer network to suggest alternatives; sometimes calles brainwriting
       • Devil's Advocate: A decision-making technique in which an individual is assigned the role of challenging the assumptions and assertions made by the group to prevent premature consensus
         • Point-counterpoint: A decision-making technique in which people are assigned to express competing points of view
           • Groupthink: The tendency of people in groups to suppress contrary opinions
             • Escalating Commitment: Continuing to invest time and resources in a falling decision
               • Information technology: The hardware, software telecommunications, database management, and other technologies used to store, process, and distribute information.
                 • Knowledge management: The process of systematically gathering knowledge, making it widely available throughout the organization, and fostering a culture of learning
                   • Data: Raw, unsummarized, and unanalyzed facts and figures
                     • Information: Data that have been converted into a meaningful and useful context for the reciever
                       • Knowledge: A conclusion drawn from information after it is linked to other information and compared to what is already known
                         • Knowledge management portal: A single point of access for employees to multiple sources of information that provides personalized access on the corporate internet
                           • Wiki: A web site that allows anyone with access, inside or outside, the organization, to create, share and edit content through a simple browser-based user interface
                             • Business intelligence software: Software that analyzes data from multiple sources and extracts useful insights, patterns, and relationships that might be significant
                               • Management information system: A computer-based system that provides information and support for effective managerial decision making.
                                 • Enterprise resource planning system: a networked information system that collects, processes, and provides information about an organization's entire enterprise from identification of customer needs ant receipt of orders to distribution of products and receipt of payment

5. Technology

   • Blog: Web log that allows individuals to post opinions and ideas.
     • Social networking: Online interaction in a community format where people share personal information and photos, produce and share all sorts of information and opinions, or unify activists and raise funds
       • Peer-to-peer file sharing: File sharing that allows PCs to communicate directly with one another over the internet, bypassing central databases, servers, control points, and web pages.
         • e-business: Any business that takes place by digital processes over a computer network rather than in physical space
           • e-commerce: Business exchanges or transactions that occur electronically
             • Intranet: An internal communications system that uses the technology and standards of the internet but i accessible only to people within the organization
               • Extranet: An external communications system that uses the internet and is shared by to ot more organizations.
                 • Market expansion: A systematic attempt to increase sales through adding target groups