Decision Making & Solv
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Transcript of Decision Making & Solv
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Copyright Houghton Mifflin Company. All rights reserved. 9 - 1
Managing Decision Making and Problem
Solving
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The Nature of Decision Making
Decision making:
The act of choosing one alternative from among a set ofalternatives.
e.g. Bharti could have selected any business for expansionbut they have selected businesses that are in line with their
existing businesses i.e. DTH, 3G
Decision-making process:
Recognizing and defining the nature of a decision situation,identifying alternatives, choosing the best alternative, and
putting it into practice
e.g. Maggi Pasta is a new product that Nestle has come outwith as this product category is growing at 70%.
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A View of Decision-Making Conditions
Certainty Risk Uncertainty
Level of ambiguity and chances of making a bad decision
Lower Moderate Higher
The decisionmaker faces
conditions of:
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Decision-Making Conditions
State of certainty:
A condition in which the decision maker knowswith reasonable certainty what the alternativesare and what conditions are associated witheach alternative.
State of risk:
A condition in which the availability of each
alternative and its potential payoffs and costsare all associated with probability estimates.
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State of Uncertainty
A condition in which the decision makerdoes not know all the alternatives, therisks associated with each, or the likely
consequences of each alternative.
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Obtain complete andperfect information.
Eliminate uncertainty.Evaluate everything
rationally and logically
The Classical Model of Decision Making
When faced with adecision situation,
managersshould
and end up with adecision that best
serves the interestsof the organization.
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Rational Perspectives on Decision Making
Classical model:
A prescriptive approach to decision making that
tells managers how they should make decisions.
It assumes that managers are logical and rationaland that they make decisions that are in the best
interests of the organization.
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Steps in Rational Decision Making
STEP
Recognize and definesituation.
Identify alternatives. Evaluate alternatives.
Select alternative.
Implement alternative.
Follow up and evaluateresults.
DETAIL
Stimulus may bepositive or negative.
Alternatives must begenerated.
Feasibility check.
Choose best fit
alternative. Implementation.
Does it work?
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Evaluating Alternatives in the Decision-Making Process
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Behavioral Aspects of Decision Making
The Administrative Model: A decision making model showing that
managers:
1. Have incomplete and imperfectinformation.
2. Are constrained by bounded rationality.
3. Tend to satisfice when making decisions.
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Different Types Of Personalities
1. Sanguine:Party types, Love to be centre of attraction,
Enthusiastic, Low on details
2 Melancholy: Lonely, depressed, high on details lowon enthusiasm, Will carry notebook for writing for any
seminar
3 Choleric: Convert every situation in to competition,Always want to win, Ruthless, want to lead but
sometimes ignore feeling of their people
4 Phlegmatic:Peace at all costs,do not want to get intoany confrontation, can keep people in teams together
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...and end up with adecision that may or
may not serve theinterests of theorganization.
The Administrative Model of Decision Making
Use incomplete andimperfect Information.
Are constrained bybounded rationality.Tend to satisfice
When faced with adecision situation
managersactually
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Bounded Rationality
A concept suggesting that decisionmakers are limited by their values andunconscious:
A. Values.
B. Unconscious reflexes.
C. Skills.
D. Habits.
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Satisficing
The tendency to searchfor alternatives only untilone is found that meetssome minimum standardof sufficiency.
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Political Forces in Decision Making
Coalition:
An informal alliance of
groups formed to achievea common goal.
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Intuition and Escalation of Commitment
Intuition:
An innate belief aboutsomething withoutconscious consideration.
Escalation of commitment:
A decision makers staying
with a decision even whenit appears to be wrong.
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Risk Propensity and Decision Making
Risk propensity:
The extent to which a
decision maker iswilling to gamble whenmaking a decision.
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Group and Team Decision Making in OrganizationsForms of Group and Team Decision Making: Interacting group or team:
A decision making group or team in which members openlydiscuss, argue about, and agree on the best alternative.
Delphi group: A form of group decision making in which a group solicits
input from a panel of experts who contribute individually;their opinions are combined and, in effect,
averaged.
Nominal group:
A structured technique, in which the group members arebrought face to face to generate:
Creativity.
Innovative alternatives.
Ideas.
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C i ht H ht Miffli C All i ht d 9 22
Advantages and Disadvantages of Group andTeam Decision Making
ADVANTAGES
More informationand knowledgeavailable.
More alternativesgenerated.
More acceptance.
Enhancedcommunication.
Better discussions.
DISADVANTAGES
The process takeslonger.
Compromiseddecisions result fromindecisiveness.
One person maydominate.