DECISION

MAKING
DECISION MAKING
■ defined as the process of defining the
problem and identifying and choosing
alternative courses of action in a
manner appropriate to the demands of
the situation.
DECISION MAKING AS
MANAGEMENT
RESPONSIBILITY
■ Decision making is a responsibility of a
manager. Management must strive to
choose a decision option as correctly as
possible. Since they have the power, they
are responsible for whatever outcome their
decisions bring. The higher the
management level is, the bigger and more
complicated decision making becomes.
The Decision-Making Process
■ Diagnosing the Problem
■ Analyzing the environment
■ Developing Viable Alternatives
■ Evaluating Alternatives
■ Making a Choice
■ Implementing the Decision
■ Evaluate and Adapt Decision Result
Diagnosing the Problem

■ Should be done whenever there’s a

difference between the actual and the
desired situation.
Analyzing the Environment

■ The objective of environmental analysis

is the identification of constraints.
Developing Viable Alternatives

■ Problems may be solved by any of the solutions

offered.
• Prepare a list of alternative solutions
• Determine the viability of each solutions
• Revised the list by striking out those which are
not viable.
Evaluating Alternatives

■ Proper evaluation makes choosing the right

solution less difficult.
Making a Choice

■ Selecting the alternative representing

potential solution to the problem.
Implementing the Decision

■ Refers to carrying out the decision so that

the objectives will be achieved.
Evaluating & Adapting the Decisions
Result
■ Using feedback and control mechanism to
ensure the results for future decisions.
Approaches in Decision Making

■Qualitative Evaluation
■Quantitative Evaluation
Qualitative Evaluation

■ Using intuition and subjective judgemet.

■ It is used when:
• The problem is fairly simple
• The problem is familiar
• The cost involve are not great
• Immediate decisions are needed
Quantitative Evaluation
■ Using a rational and analytical techniques.
■ Types:
• Inventory Model
• Queuing Theory
• Network Model
• Forecasting
• Regression Analysis
• Simulation
• Linear Programming
Inventory Models
■ Designed to help the manager decide
regarding inventory.
i. Economic Order Quantity Model
ii. Production Order Inventory Model
iii. Back Order Inventory Model
iv. Quantity Discount Model
Queuing Theory
■ Describes how to determine the number of
service units that will minimize both
customers waiting time and cost of service
Network Models

■ Models where large complex tasks are

broken into smaller segments that can be
managed independently.
Forecasting

■ Collecting past and current information to

make predictions about the future
Regression Analysis

■ Is a forecasting method that examines the

association between two or more variables.
Simulation

■ Is a model constructed to represent reality,

on which conclusions about real-life
problems can be used.
Linear Programming

■ A quantitative technique that is used to

produce an optimum solution within the
bounds imposed by constraints upon the
decision.
ACTIVITY:

■ As a decision-maker, list the top five

decisions you made. Were they based
primarily on qualitative or quantitative
approach? Explain.