decision making models Flashcards
what are the 3 types of decisions made by a business?
strategic, tactical, operational.
what are strategic decisions?
long term and will affect direction business takes, made by senior managers.
what are tactical decisions?
short to medium term implement strategic decisions. less complex. more flexible.
what are operational decisions?
day to day decisions made in business. low risk short term.
importance of decision making?
can solve big problems for common good of business.
minimise risk.
what are the 2 ways of making decisions?
science and intuition.
5 steps involved in scientific method of decision making?
identify problem
collect relevant info (primary/secondary)
analyse info
make and implement decision
review decision.
what is intuitive decision making?
use experience and gut feelig to make decision with no data to back up.
benefits of decision trees?
lays out problems so all options considered.
fully analyse possible outcomes
provides framework to quantify values of outcomes and probabilities of achieving them.
uses historical data
show probability of success and failure
limitations of decision trees?
probabilities may be inaccurate.
may oversimplify decision and focus too much on financial outcome.
time consuming.
what is critical path analysis?
method of planning and controlling large projects and helps make decisions on management of resources and time
what does CPA allow a business to do?
plan activities involved in projects so that project is completed in most efficient way.
allocate resources within project
judge how long project should take.
what is a critical task?
one that must be started and completed on time for project to be finished on time.
how is the critical path indicated?
double slashes along it.
what’s the number underneath the path?
duration of task.
whats’ the top right hand side of node in CPA?
earliest possible start time of next activity.
what’s the bottom right hand node in CPA
latest time the previous activity can finish by.
how can you identify the critical path?
activities where node has same EST and LFT.
what happens if there’s delay on the CP?
overall project is delayed.
advantages of CPA?
effective for managing complex projects.
effective management of resources and labour.
reduces need for unneeded working capital.
improves cash flow due to less working capital
can see efficiency of individual activities and if extra training is needed.
competitive advantage by being more efficient.
disadvantages of CPA?
poor methods of estimation may be used.
lack of experience leads to inaccuracies.
ignores external factors.
manager can’t control subcontractors.
time consuming and needs ongoing checking.
doesn’t ensure quality.
what is cost benefit analysis?
method of assessing viability of project based on social costs and benefits. both private and public costs must be considered.
example of private costs?
equipment, land marketing.
example of private benefits?
productivity, sales, brand awareness, increased profits.
