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Presented To Prof. Anuradha Presented by TEAM 5

Decision making is the process of selecting a

particular course of action among the various alternatives. Every decision maker have to work on uncertainities.

Decision making: The process by which managers

respond to opportunities and threats by analyzing options, and making decisions about goals and course of action. Decisions in response to opportunities: Managers respond to ways to improve organizational performance. Decisions in response to threats: Occurs when managers are impacted by adverse events to the organization.

Effective decision making must be rational Clear understanding of alternative courses by

which a goal can be reached. They also must have information and ability to analyze and evaluate the alternatives.

Programmed Decisions: routine, almost automatic

managers have made decisions many time before. There are rules or guidelines to follow. Example: deciding to reorder office supplies.

Non-programmed decisions: unusual situations

that have not been often addressed.

No rules to follow since the decision is new. These decisions are made based on information, and

a manager`s intuition, and judgment. Example: should the firm invest in a new technology?

Classical model of decision making: a

prescriptive model that tells how the decision should be made.

Assumes managers have access to all the

information needed to reach a decision. Managers can then make the optimum decision by easily ranking their own preferences among alternatives.

Unfortunately, managers often do not have

all(or even most) required information.

Administrative model of decision making: Challenged the classical assumptions that managers have and process all the information. As a result, decision making is risky. Bounded rationally: There is a large number of alternatives and information is vast so that managers cannot consider it all. Decisions are limited by people`s cognitive abilities. Incomplete information: most managers do not see all alternatives and decide based on incomplete information.

Recognize need for a decision Frame the problem Generate & assess alternatives Choose among alternatives Implement chosen alternatives Learn from the feedback

Recognize need for a decision: Managers must first realize that a decision must be made. Sparked by an event such as environment changes. Generate alternatives: managers must develop feasible alternative courses of action. If good alternatives are missed, the resulting decision is poor. It is hard to develop creative alternatives, so managers need to look for new ideas. Evaluate alternatives: what are the advantages and disadvantages of each alternative? Managers should specify criteria, then evaluate.

Choose among alternatives: managers rank alternatives

and decide.

When ranking, all information needs to be considered.

carry out the alternative.

Implement choose alternative: managers must now

Often a decision is made and not implemented.

Learn from feedback: managers should consider what


went right and wrong with the decision and learn for the future.
feedback, managers never learn experience and make the same mistake over. from

Managers must first be sure that an alternative is legal both in this country and abroad for exports. Is it ethical? The alternative must be ethical and not hurt stakeholders unnecessarily. Is it economically feasible? Can our organization s performance goals sustain this alternative? Is it practical? Does the management have the capabilities and resources to do it?
Is it legal?

Certainty: A situation in which a manager can make an accurate decision because the outcome of every alternative choice is known. Risk: A situation in which the manager is able to estimate the likelihood (probability) of outcomes that result from the choice of particular alternatives.

Uncertainty: Limited information prevents estimation of outcome probabilities for alternatives associated with the problem and may force managers or rely on intuition, hunches, and gut feelings . #MaxiMax: The optimistic manager`s choice to maximize the maximum payoff. #MaxiMin: The pessimistic manager`s choice to maximize the minimum payoff. #MiniMax: The manager`s choice to minimize maximum regret.

It focuses on what is important It is logical and consistent. It acknowledges both subjective and objective thinking and blends analytical with intuitive thinking. It requires only as much information and analysis as is necessary to resolve a particular dilemma. It encourages and guides the gathering of relevant information and informed opinion. It is straight-forward, reliable, easy to use, and flexible.

The group shares ideas and analyses, and agrees

upon a decision to implement.  Just from an efficiency standpoint, group decision making is better. Individual decision maker prefer to implement the ideas they themselves think of. Where as in group, combined skills, and abilities are performed.

Devil s Advocacy: one member of the group acts as the

devil s advocate and critiques the way the group identified alternatives.
Points out problems with

the alternative selection.

Dialectical inquiry: two different groups are assigned to


the problem and each group evaluates the other group s alternatives.
managers then hear each group present their alternatives and each group can critique the other.

group, a wider set of alternatives may be considered.

Promote diversity: by increasing the diversity in a