Sara Gonçalves

ST70289

Assignment 4 – repetition of knowledge

1. What is decision making and decision theory?

Decision making is a process of making decisions by identifying a decision, gathering information and
evaluating alternative resolutions.
Using a step-by-step decision-making process helps to make thoughtful decisions by organising
relevant information and defining the best alternatives.

Decision theory is a branch that studies how to optimise decision making under risk and uncertainty,
and also how people make decisions. It is based on assigning probabilities to various factors and
assigning numerical consequences to the outcome.

2. Explain the terms Buridan's Donkey, Occam's Razor and Common Sense

Buridan's Donkey is a paradoxical situation of philosophy in the conception of free will. It refers to a
situation where a donkey who is equally hungry and thirsty is placed precisely halfway between a pile
of hay and a bucket of water. The paradox suggests that the donkey, unable to choose between the
two, may starve to death or die of thirst.

Occam's Razor is a principle that suggests that the simplest explanation that accounts for the available
evidence is usually the most accurate. In other words, when there are multiple possible explanations
for a phenomenon, the explanation that makes the fewest assumptions is typically the best one.

Common sense is sound, practical judgment concerning everyday matters, or a basic ability to
perceive, understand, and judge in a manner that is shared by nearly all people.

3. Create DP: choice of university - decision table (matrix)

 describe in detail the criteria (at least 5) of the university selection.
 at least 2 DP alternatives

The decision maker will have to evaluate the alternatives, between University 1 and University 2,
based on the five criteria specified. By comparing the current alternatives with the criteria, the
decision maker will be able to make a better choice, taking into account his objectives and priorities.

Decision Problem: Choice of University

Criteria: 1) University Location; 2) Costs; 3) Opportunity for career success; 4) Reputation; 5)

Campus Environment

Alternatives: 1) University 1; 2) University 2.

Criteria University 1 University 2

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University Location Urban area Rural area

Costs Affordable tuition and fees Less affordable tution and fees
Opportunity for career High employability rate Good employability rate
success
Reputation Strong reputation Less good reputation

Campus Environment Activate campus life with various Small campus community with close
academic activities relationships and calm environment

1) University location - A university located in a large city may offer more opportunities and
resources to students, and it is more likely to be close to other academic institutions. Whereas
a university located in the countryside offers a better quality of life, with a quieter and more
secluded environment which is the case with University 2, which is ideal for students who
prefer a less hectic environment away from the hustle and bustle of the city.

2) Cost - Cost is one of the most important criteria for many students and families. Many
students have a preference for a university with more affordable costs, while others prefer to
pay more because there is the possibility of the university providing other benefits. Among the
two universities the University 1 is the one with the least expensive prices.

3) Opportunity for career success - Students often take this aspect into account when choosing
a university. The various programs that the university offers are important, such as internships
that can provide valuable experiences and work opportunities, especially for those students
who are sure of what they want to work in the future. In this case, University 1 has the highest
employment rate.

4) Reputation – The reputation of a university is a very important factor that can influence a
student's future. Students who value reputation in their field of study and for their choice of
university should choose University 1, for others who don't attach as much importance to this
criterion they should choose University 2.

5) Campus environment – The campus environment has an impact on the overall student
experience, especially academic performance. Many students have a preference for a more
active academic life with different activities, which can be found at University 1, while others
do not prioritize this criterion, and prefer a more calm environment, as is the case at
Universidade 2.

4. Usage, explanation of the term Decision Maker

A decision maker is the person or group of individuals responsible for making strategically important
decisions based on the results of the decision-making processes. The manager may need to consider
factors such as demand forecasts, production capacity, and supplier lead times to arrive at a decision.
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Decision makers are responsible for analyzing all available information, considering the various
factors and evaluating all results, with the aim of reaching a decision that is aligned with their goals
and objectives. They must have the ability to communicate their decisions effectively and take
responsibility for their results.

5. Your own example, where you define a management system and a part of it that
concerns decision-making.

A management system describes how companies organize their structures and processes in order to act
systematically, ensure smooth processes and achieve planned results. Management systems can be
used in all areas, such as safety, environment, quality, and others, depending on where your company
operates and what your objectives are. This system is essential as it provides a more structured
approach to decision making, which helps organizations make the best decisions. This component
includes a structured process for decision making that involves identifying the problem, collecting
relevant data, analyzing the data, identifying possible solutions, and selecting the best option.
For example, if the car company is considering the introduction of a new model, the decision-making
component will be involved in assessing the feasibility of this idea. This process would involve
collecting data, assessing customer preferences, evaluating the costs and benefits of developing this
new product. With this to make a decision based on the recommendation of the entire management
team, realizing whether or not to continue with the project.
Effective decision making is critical to ensure that the car is of high quality and meets the customers'
needs. There are a number of steps that are important in the decision-making process, which could be:
Identify the problem/opportunity: The first step is to identify the need or opportunity for a new car
model. The company must understand customer needs and preferences through market research and
other feedback mechanisms.
Collect information: Once the problem/opportunity has been identified, collecting relevant information
is important for decision making. It should involve conducting research, such as evaluating trends,
sales, among others.
Analyze the information: After collecting the information, it is important to analyze and interpret the
collected data to identify patterns. This can help identify possible risks, opportunities and potential
tradeoffs associated with introducing a new car model.
Develop alternatives: Based on the analysis of the information, the next step is to develop alternative
options or solutions. This may involve testing or stakeholder engagement.
Evaluate the alternatives: Once the alternatives have been developed, it is important to evaluate them,
such as their cost, feasibility, market demand as well as the impact given the company's existing
product lines.
Making a decision: After evaluating the alternatives, making a final decision about introducing the
new car model would be the next step. This decision should be based on the information and
alternatives gathered, as well as the company's strategic goals and objectives.
Implement the decision: Once the decision has been made, it is important to develop an
implementation plan that outlines the steps needed to introduce the new car model, this could for
example involve developing a marketing strategy.
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Monitor and Evaluate the Results: After implementing the decision, it is important to monitor and
evaluate the results to determine the effectiveness of the new car model.Overall, the decision-making
component of the automotive company's management system plays a crucial role in ensuring that the
company makes informed and effective decisions that are aligned with its overall strategic goals and
objectives.
By following a structured decision-making process for the project, the automotive company can ensure
that its products meet customer needs, can lead to greater customer satisfaction, improve brand
reputation, and thus earn greater profit.

6. Manager's Decision Environment - Choose 3 factors and explain how they affect the
manager.

The manager´s decision environment is the context in which a manager operates when making
decisions for their organization. There are several factors surrounding the Manager's Decision
Environment, but we can focus on just three of them, below we can see the examples:

a) Technological advances - where the rapid pace of technological advances can influence
managers' decision-making process. Emerging technologies can disrupt traditional business
models and create new challenges and opportunities for organizations.

b) Expectations of stakeholders - such as customers, employees and the entire community, can
also influence the decision-making environment of managers. They need to be aware of the
expectations and needs of all stakeholders to ensure that decisions are in line with their
interests. For example, a manager must decide whether to invest in employee training and
development to improve their skills and productivity.

c) Globalization - in the world we live in managers need to consider the impact of globalization
on their decision making environment. Globalization has increased competition, created new
markets, and made the whole process of exchanging goods and services easier, such as
deciding whether to expand the business into new markets or adapt to current ones.

7. Define your own decision problem using a decision table:

5 criteria (different scales, scales - nominal, ordinal, quantitative will be used) and 3
alternatives.

Decision problem: Choosing a computer.

Criteria: 1) Memory; 2) Storage; 3) Price; 4) Battery life; 5) Weight.

Alternatives: 1) ASUS: 2) HP; 3) Apple.

In this decision table, the decision maker is trying to choose between three different alternatives the
best computer, keeping in mind that the decision maker is a student and needs a long-lasting battery,
plenty of storage and that it is not heavy. The decision table includes five criteria such as price, battery
life, storage, operating system, and weight.
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Criteria Scale ASUS HP APPLE

Price Quantitative € 1500 € 1000 € 2000
Battery life Quantitative 4-12 hours 4-12 hours 8-12 hours
Storage Nominal Medium Medium High
Operating System Nominal Windows Windows/macOS macOS
Weight Ordinal Light Medium Heavy

8. Define MCDM and MCDA terms, including citations!

Multi-criteria decision making (MCDM) is one of the main decision-making problems that aims to
determine the best alternative by considering more than one criterion in the selection process.
According to Saaty (2016), " a set of methods and techniques that aim to support decision-makers in
choosing the best option among several alternatives, taking into account multiple criteria or
objectives." The purpose of MCDM is to support decision makers facing decision and planning
problems based on a set of criteria.
Multi-Criteria Decision Analysis (MCDA), is a subset of MCDM. MCDA supports decision makers in
evaluating and ranking or selecting different alternatives, using systematic analysis to overcome the
limitations of unstructured individual or group decision making.
According Belton and Stewart (2002), MCDA is "the study of methods and procedures by which
concerns about multiple conflicting criteria can be formally incorporated into the management
planning process."
Multicriteria analysis is a method of research and decision-making analysis that is particularly
applicable to complex problems where a single-criteria approach falls short and it is necessary to
include a full range of geographical, economic, social, environmental, technical and other factors.

Citations:

Saaty, T. L., Peniwati, K., & Shang, J. S. (2016). An analytic network process approach to project management
decisions. International Journal of Project Management, 34(8), 1594-1608.

Belton, V., & Stewart, T. J. (2002). Multiple criteria decision analysis: an integrated approach. Springer Science
& Business Media.

9. Comparison of Stages of the decision-making process according to H. A. Simon and Jiří

Fotr

Herbert A. Simon and Jiří Fotr proposed decision making process models. The Simon Decision
Making Theory is a framework that provides a more realistic view of the world, where decisions affect
prices and outputs, Fotr emphasizes more the importance of intuition and insights in decision making.

Simon´s model consists in:

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1. Intelligence: At this stage, people identify the problems in an organization and the upper
management analyzes the organizational environment to work toward a solution.
2. Design: In order to identify possible solutions to problems, the upper management looks for suitable
strategies. They further analyze the merits and demerits to select a particular course of action.
3. Choice: After making a list of alternatives, the choice activity stage begins. It critically examines
and evaluates the various consequences of all alternatives and the most suitable course of action is
selected. This stage requires creativity, judgment and quantitative analysis skills.

Fotr’s model, on the other hand, consists in four steps:

Step 1: Recognition – first identify the problem that needs to be addressed;
Step 2: Research – so we need to gather information and generate alternative solutions;
Step 3: Evaluation – this step involves evaluating the alternatives against all the advantages and
disadvantages and choosing the best one;
Step 4: Implemention - Finally, the last step refers to the implementation of the choice made.
With this, we can see that both models offer different perspectives, but both provide important steps to
understand how decisions should be made.

10. Explanation of criteria scales, examples of scales

Criteria scales are a way of measuring and evaluating different options or alternatives based on
specific criteria or factors. A criteria scale can include a list of criteria, which are the factors that are
important to the entire decision-making process. Each criterion is then assigned a numerical or
qualitative value, which represents the importance or weight of that criterion in the decision-making
process.

There are different types of criteria scales, for example: ordinal, cardinal, and nominal.
Ordinal scale – in this scale we can categorize and rank each alternative in an order, but a comparison
or measurement cannot be made in absolute terms

Cardinal scale – Cardinal numbers are numbers used for counting, i.e. a quantitative scale. This helps
to know how many elements there are and to compare and measure the values in absolute terms.

Nominal scale - in this scale we can categorize data by labeling them into mutually exclusive groups
based on their characteristic.