Decision making models Flashcards
(27 cards)
What is a strategic decision
long term and effects direction business takes often made by senior management or owners are often complex and effect organisational structure may also involve large financial commitment and takes time to see effect
What is a tactical decision
often medium term and less complex being carried out by middle management often more flexible and if it doesn’t meet objectives it can be changed such as the way to promote a product
what are operational decisions
day to day decisions that are short term and have little risk involved made by junior mangers, supervisors and employees no need for careful thought or strategic planning for example retail supervision decisiding lunch breaks
What is scientific decision making
use facts and data to gain evidence based, logical decisions
1. identify objective or decision
2.gather info needed to make
3.analyse info gatherd to identify way forward
4.make and implement decision
5.moniter and review decision and change if needed
Why is science based favoured
based on logic and evidence reducing risk of failure
considering alrernative decisions so best one is made
can be linked to use of business models like swot analysis, porters 5 forces and ansoff matrix
What is intuitive decision making
using experience and intuition to make decisions no data or systematic approach to back it up but can be made quickly often used for operational decisions however for strategic and tactical large risk involved
Scientific or intuitive?
+logical and rational process reducing risk
+review and checks enables wider consideration
-slower
-expensive
-data bias
+quicker
+experienced mangers to rely on previous decisions
-risks
-difficult to justify and sell
What is a decision tree
form of diagrammatic analysis used to help make decisions when several different options
When are they usful
situations where chance or probability play important role in outcome
build probability of success and failure into decisions presenting expected values which are financial returns from options
Qualitive impacts
impact on customer satisfaction snd loyalty
how product supports brand image
impact on employees
Pros and cons of decision trees
-clearly lay out problems so all options can be considered allowing managers to see consequences and risks and see value
-make objective quantifiable decision
-includes costs of each course of action and allows full analysis
-doesnt account for qualitive data
-only as good as the data may be in accurate
What is cpa
method of plannung and controlling large projects and use to make decisions on management of resources and time
What is the critical task
activity that must be started and completed on time if projects to be finished on time
What is float time
lft-duration-est
What does float time allow
managers to be flexible in carrying other activities (switch employees to complete other activities)
link resource allocation to stocks and use of jit jot beint started till later so stock ordered only when needed preserving cash flow
Benefits of cpa and drawbacks
-ensure business will become more efficient by saving time and possibly materials
-meet critical deadlines to not let customers down
-problems highlighted early ensuring project is not delayed
-effective management of resources knowing where to allocate labour, equipment identifying float time activities
-time estimates could be wrong
-unexpected events such as delayed supplys means will need to be adjusted
-doesnt ensure quality only deadlines met
-experience of those constructing cpa
What is cost benefit analysis
measuring in financial terms the costs and benefits of an investment project-includes external costs and benefits to society as well as costs and benefits to business to establish wether worthwhile
Who may use cba
goverments when considering a public project
What two groups is cba divided into
-private costs and benefits
-external/social costs and benefits
What are private and external costs
-costs business must except like training and recruiting, new capital equipment marketing costs also costs customers pay for product
-costs external to business-building company-traffic noise,factory=less open space
What are private benefits and external benefits
-benefits business gains, increased sales, productivity, profits and brand value and benefits customers receive
-benefits external to business, jobs, business activity so tax paid, crime and social problems reduced
A difficulty with cba
how to quantify external costs and benefits giving them monetary value
Process of cba
-calc priv costs and benefits business benefits
-calc external benefits and costs
-calc social benefits and costs
-consider qualitative factors
-decide wether to go ahead
Ads and disads of cba
-takes into account wide range of benefits and costs
-impacts on society included
-puts value on external benefits snd costs that would normally be ignored
-valuation of intangibles difficult
-hard to include all stakeholders
-if calculated incorrectly wrong choice made
