Decision Making

Question 1

Three conditions of decision-making

Answer 1

1. Certainty
2. Risk
3. Uncertainty

Question 2

Certainty

Answer 2

• The outcome of each alternative course of action is known

E.g Financial decisions - choices of sources or funds, interest rates, repayment periods

Question 3

Risk

Answer 3

• The outcome of each alternative is not completely certain
• Involves probabilities by using statistical models or on management’s experience.
• Risk is common

Question 4

Uncertainty

Answer 4

• Management cannot even put probabilities on the outcomes of the alternative courses of action available.
• Presented by top management (non-routine -not covered by standard procedure)
• Long term nature

Question 5

DODDSE

Answer 5

1. Define the objective
2. Outline the facts
3. Decide on the cause/s
4. Develop several solutions
5. Select the preferred alternative and implement it
6. Evaluate the effectiveness of the solution

Question 6

SWOT

Answer 6

• Strengths, Weakness (internal)

- Opportunities, Threats (external)

Question 7

Examples of Strengths & Weakness

Answer 7

• People; skills, training, attitude
• Organisation: structure, management style, relationship
• Communication and telecommunication
• Credentials: Image, trade, customer perception
• Production: Capacity, Quality, Productivity
• Products: quality, life, production cost

Question 8

Examples of Opportunities & Threats

Answer 8

• Market: growth, decision, trend
• Technology: product development, production technology
• Finance: resources, interest rates
• Economic Climate - level of spending, export/import conditions, exchange rates
• Society: employment practice, sales practice
• Legislation: environmental, consumer protection, product liability
• Ecology: raw materials, recycling, environmental protection, energy