Strategic decision making
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Transcript of Strategic decision making
STRATEGIC DECISION MAKING
CHANDRA SHEKHAR PANDEY
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What is Decision Making?
Decision making
The act of choosing one alternative
from among a set of alternatives
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Dimensions of Strategic Decisions
• Top management Decisions• Are future oriented• Require Large amount of resources• Affect long term prosperity of the
firm• Usually have multifunctional
consequences
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Characteristics of Strategic Decisions
◆ They are elusive problems that are difficult to define precisely.
◆ They require an understanding of the problem to find a viable solution.
◆ They rarely have one best solution, but often a series of possible solutions.
◆ Questions about trade-offs and priorities appear in the solutions.
◆ Solution benefits are difficult to assess as to their effectiveness, in part because
they lack a clear final end point against which effectiveness can be judged.
◆ Other problems in the organization are connected to solutions for a focal
problem.
◆ High levels of ambiguity and uncertainty are associated with solutions.
◆ Realizing hoped for benefits has considerable risk.
◆ Strategic decisions have competing interests that prompt key players to use
political pressure to ensure that a choice aligns with their preferences.
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Types of Decision Making
1.Programmed decision
A decision that is fairly structured or
Recurs with some frequency (or both)
2.Non programmed decision
A decision that is relatively
unstructured and occurs much less
often than a programmed decision
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Decision Making Conditions The decisionmaker faces
conditions of….
Certainty Risk Uncertainty
Level of ambiguity and chances of making a bad decision
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Perspectives/models of Decision Making
1. Classical or Rational Model-
Managers are logical and rational and that they make decisions that are in the best interests of the organization.
2. Behavioral Model :-
Managers are not always logical and they use intuition, and personal judgements in making decisions
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Assumptions of Rational Model
• 1. Decision makers have complete information about the decision situation and possible alternatives.
• 2. They can effectively eliminate uncertainty to achieve a decision condition of certainty.
• 3. They evaluate all aspects of the decision situation logically and rationally.
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Steps in Rational Decision Making Process
• Objectives to be achieved are determined.
• Alternative ways of achieving these objectives are identified.
• Each alternative is evaluated.• The best alternative is chosen
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Behavioral Model of Decision Making
1. Administrative Model:- Managers
(1)use incomplete and imperfect information,
(2) constrained by bounded rationality,
(3) tend to “satisfice” when making
decisions
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• Bounded rationality
A concept suggesting that decision
makers are limited by their values and
unconscious reflexes, skills, and habits
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• Satisfying
The tendency to search for alternatives
only until one is found that meets some minimum standard of sufficiency
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Because of the inherent imperfection of information, bounded rationality, and satisficing, the decisions made by a manager may or may not actually be in the best interests of the organization. A manager may choose a particular location for the new plant because it offers the lowest price and best availability of utilities and transportation. Or she may choose the location because it is located in a community where she wants to live.
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Intuition
• An innate belief about something,
without conscious consideration
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Escalation of commitment
• A decision maker’s staying with a decision even when it appears to be wrong
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Scope of Strategic Decision Making
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Advance issues in Strategic Decision Making???????
To be continued……………………………………….