3.2.2: Understanding management decision making

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Decision making (scientific/institution): factors affecting, influences, advantages and disadvantages), decision trees (advantages and disadvantages), CSR
Ashleigh-Jade Jones
Flashcards by Ashleigh-Jade Jones, updated more than 1 year ago
Ashleigh-Jade Jones
Created by Ashleigh-Jade Jones over 7 years ago
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Question Answer
Decision Making Is All About: *MINIMISING RISK AND MAXIMISING REWARD
Risk Of Making Wrong Decision: -losing money (loss not profit) -bad staff morale -lack of staff motivation -loss of customers -Share price fall (Plc) -bad reputation/credibility
Reward Of Making Right Decision: -profits -> cash -opportunities for expansion/growth -people -> improved morale & motivation -attract good staff
Scientific Decision Making a method where decision are based on data and their outcomes compared to initial objectives
Scientific Decision Making: Set objectives (SMART) | Collect data (market research) | Analyse data (is it reliable?) | Make decision (strategic: long term or tactical: short term) | Implement decision | Review decision
Advantages of Scientific Decision Making: -logical/structured approach -reduces risk of mistakes -easier representation of decision to other people in the business -easy to compare outcomes
Disadvantages to Scientific Decision Making: -theoretical approach -conflicts possible with mission statement/objectives -time consuming -only looks at numbers -reliability of the data (is it up to date?)
Decision Trees: *Expected value of both outcomes x probabilities, added together = EXPECTED NET VALUE OF OPTION *Expected net value - initial cost = NET GAIN
Advantages of Decision Trees: -predicts success or failure based on market research and quantifiable (measurable) data -allows for uncertainty -logical/structured
Disadvantages of Decision Trees: -uncertainty/risk always a factor -what if data is unreliable? -time consuming -ignores any qualitative factors -mistakes possible
Factors Affecting the Decision: -mission -> must satisfy mission -objectives -> satisfying mission by ensuring employees understand their objectives -ethics ->mustn't go against -external environment -> PESTLE, P5F (competition) -resources -> limitation of (money, time, people, equipment)
Advantages of Institution Decision Making: (gut instinct) -fast decisions -experience counts -matching of mission/objectives likely
Disadvantages of Institution Decision Making: -no back/data to support the decision -can be unreliable/biased
Decisions Are Also Influenced By: -uncertainty *OPPORTUNITY COST (the cost of a decision measured by the benefits foregone of the next best alternative)
Corporate Social Responsibility: A company's sense of responsibility towards the community and environment in which it operates e.g. reducing waste/pollution or contributing to educational programmes (Google Green -> uses resources efficiently and support renewable energy)
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