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Questions and Answers

A scientist cites two studies that show a positive effect for a drug while ignoring five other studies that show a negative effect. Which error or bias is she committing?

  • Anchoring effect
  • Self-serving bias
  • Confirmation bias (correct)
  • Hindsight

    • Which of the following is NOT a common decision-making error or bias?

  • Randomness
  • Sunk costs
  • Overconfidence bias
  • Forest for the trees (correct)

    • What does it mean for a decision maker to maximize value?

  • To make the decision to be as clear and logical as possible.
  • To waste as little time and energy as possible.
  • To make decision making as simple as possible.
  • To make the achievement of goals as likely as possible. (correct)

    • Which of the following is an example of an unstructured problem?

    <p>Choosing the best wardrobe for an executive.</p> Signup and view all the answers

    Following the directions to put together an elliptical exercise machine is an example of which way to solve a problem?

    <p>Procedure</p> Signup and view all the answers

    If a car buyer knows the inventory dealer price of the same car at different dealerships, he is operating under what type of decision-making situation?

    <p>Certainty</p> Signup and view all the answers

    Group decision making typically increases the legitimacy of a decision because the decision was made ____________.

    <p>democratically</p> Signup and view all the answers

    Which of the following would you expect to find in a clothing store that follows a cost leadership strategy?

    <p>Basic, no frills, practical items.</p> Signup and view all the answers

    A company with a differentiation strategy focuses on making its products or services ____________.

    <p>unique and special</p> Signup and view all the answers

    In traditional goal setting, as they work their way from top management to employees, goals are likely to ____________.

    <p>become less clear</p> Signup and view all the answers

    Tactical plans are operational plans that identify _________.

    <p>how overall goals are to be achieved</p> Signup and view all the answers

    The more uncertain a situation is, the more _______ plans must be.

    <p>flexible</p> Signup and view all the answers

    What are the 8 steps to decision making?

    <ol> <li>Problem Identification, 2. Criteria Identification, 3. Weight Allocation, 4. Development of Alternatives, 5. Analysis of Alternatives, 6. Selection of Alternative, 7. Implementation, 8. Evaluation.</li> </ol> Signup and view all the answers

    Rules of thumb or judgmental 'short-cuts' that simplify decision making are called?

    <p>Heuristics</p> Signup and view all the answers

    The belief that we know more than we do is called?

    <p>Overconfidence Bias</p> Signup and view all the answers

    We select an alternative because it delivers more immediate benefits and delays the cost paid is known as?

    <p>Immediate Gratification Bias</p> Signup and view all the answers

    Over reliance on the first piece of information when making a decision is called?

    <p>Anchoring Effect</p> Signup and view all the answers

    Seeking out or believing only that information which confirms past judgments, discounting those that contradict is known as?

    <p>Confirmation Bias</p> Signup and view all the answers

    Choosing only that which fits our bias (cherry picking) is referred to as?

    <p>Selective Perception Bias</p> Signup and view all the answers

    Choices that are logical, consistent, and made to maximize value describe?

    <p>Rational Decision Making</p> Signup and view all the answers

    Rarely have all the information needed. This view of decision making assumes that there are limits on how much an individual can know is known as?

    <p>Bounded Rationality</p> Signup and view all the answers

    We accept the solution that is 'good enough' is defined as?

    <p>Satisfice</p> Signup and view all the answers

    An increase in commitment to a prior decision despite evidence that it may have been wrong is known as?

    <p>Escalation of Commitment</p> Signup and view all the answers

    Making decisions based on experience, feelings, and judgment is referred to as?

    <p>Intuitive Decision Making</p> Signup and view all the answers

    ____ Problems that are straightforward, familiar, and easily defined.

    <p>Structured problems</p> Signup and view all the answers

    ____ Problems that are new, unusual and for which information is ambiguous or incomplete.

    <p>Unstructured problems</p> Signup and view all the answers

    Repetitive, use a routine approach for handling structured problems describe?

    <p>Programmed</p> Signup and view all the answers

    A unique, non-recurring decision that requires a custom-made solution is known as?

    <p>Non-programmed</p> Signup and view all the answers

    3 units of programmed decisions?

    <ol> <li>Procedures, 2. Policies, 3. Rules</li> </ol> Signup and view all the answers

    A set of interrelated sequential steps to resolve a problem is called?

    <p>Procedures</p> Signup and view all the answers

    A guideline for making decisions is referred to as?

    <p>Policies</p> Signup and view all the answers

    An explicit statement that tells employees what can and cannot be done is called?

    <p>Rules</p> Signup and view all the answers

    3 Conditions that affect decision making?

    <ol> <li>Certainty (know all outcomes), 2. Risk (informed but not totally informed), 3. Uncertainty (guessing)</li> </ol> Signup and view all the answers

    Rationalization of facts that don't support assumptions is known as?

    <p>Groupthink</p> Signup and view all the answers

    ____ comes from doing things differently than competitors or doing the same things better than competitors.

    <p>Competitive Advantage</p> Signup and view all the answers

    Planning for how the organization will compete is known as?

    <p>Competitive Strategy</p> Signup and view all the answers

    3 types of competitive strategies?

    <ol> <li>Cost leadership, 2. Differentiation, 3. Focus</li> </ol> Signup and view all the answers

    Comparing firm performance to that of other firms is referred to as?

    <p>Benchmarking</p> Signup and view all the answers

    Establish overall objectives, position the firm in terms of environment, drive organization efforts to achieve its goals describes?

    <p>Strategic Plans</p> Signup and view all the answers

    Specify the details of how to achieve the overall objectives in specific contexts refers to?

    <p>Tactical Plans</p> Signup and view all the answers

    3 factors that affect choice of plans?

    <ol> <li>What level of the organization, 2. What level of environmental uncertainty, 3. What time frame?</li> </ol> Signup and view all the answers

    Taking credit for the firm's successes and blaming others for its failures is known as?

    <p>Self-serving bias</p> Signup and view all the answers

    SWOT stands for?

    <p>Strengths, Weaknesses, Opportunities, Threats</p> Signup and view all the answers

    Organizations in real trouble may adopt this kind of corporate strategy?

    <p>Renewal</p> Signup and view all the answers

    When vividness/recentness distorts our perception, this is known as?

    <p>Availability Bias</p> Signup and view all the answers

    Organizational-level goals for everything but finances are called?

    <p>Strategic Goals</p> Signup and view all the answers

    Flexible, general guidelines are also known as?

    <p>Directional Plans</p> Signup and view all the answers

    Plans that are clearly defined and leave no room for interpretation are called?

    <p>Specific Plans</p> Signup and view all the answers

    Outperforming rivals over the long term is referred to as?

    <p>Sustained Competitive Advantage</p> Signup and view all the answers

    The three levels of organizational strategy are?

    <p>Corporate, Competitive, Functional</p> Signup and view all the answers

    When meeting lower-level goals helps fulfill higher-level goals, this is referred to as?

    <p>The Means-End Chain</p> Signup and view all the answers

    When Yahoo acquired Tumblr in 2013, this was an example of a __________ strategy through _________.

    <p>Growth - Diversification</p> Signup and view all the answers

    The two types of integration strategy are?

    <p>Horizontal &amp; Vertical</p> Signup and view all the answers

    ____ false parallel of current events to other events, something that is not occurring here.

    <p>A representation bias</p> Signup and view all the answers

    ____ blaming the situation on outside influences.

    <p>Self-serving bias</p> Signup and view all the answers

    ____ occurs when decision makers value only the most recent events that are relevant to the situation.

    <p>Availability bias</p> Signup and view all the answers

    The final step of the decision-making process is to implement the alternative that has been selected.

    <p>False</p> Signup and view all the answers

    Which three conditions do decision makers face? (Select all that apply)

    <p>Certainty, risk, uncertainty</p> Signup and view all the answers

    Which of the following is a primary characteristic of groupthink?

    <p>Complete conformity among group members</p> Signup and view all the answers

    A judge consults guidelines before handing down an award for damages in a legal case. What kind of decision making is she doing?

    <p>Following a policy</p> Signup and view all the answers

    Programmed decisions draw heavily on which of the following?

    <p>Past solutions that were successful</p> Signup and view all the answers

    Structured problems are ________.

    <p>clear and straightforward</p> Signup and view all the answers

    A synonym for the word satisfice is maximize.

    <p>False</p> Signup and view all the answers

    Maximizing value means a decision will have the best possible outcome for the parties involved.

    <p>True</p> Signup and view all the answers

    The expression 'throwing good money after bad' is an example of an escalation of commitment.

    <p>True</p> Signup and view all the answers

    Which of the following is NOT assumed in a rational decision?

    <p>Most alternatives and consequences are known</p> Signup and view all the answers

    A decision criterion defines factors that are relevant in a decision.

    <p>True</p> Signup and view all the answers

    A manager can faithfully execute the decision-making process but still end up with nothing of value if ________.

    <p>He fails to identify the correct problem</p> Signup and view all the answers

    What is a heuristic?

    <p>A shortcut or rule of thumb that is used for decision making</p> Signup and view all the answers

    One legislator sees decreased tax revenue as the key problem in the budget. A second legislator sees increased spending as the problem. Each of these legislators has a(n) ________.

    <p>Framing bias</p> Signup and view all the answers

    To identify a problem, a manager ________.

    <p>Compares the current state of affairs with some standard or goal</p> Signup and view all the answers

    Informal plans are not recognized to be an effective form of planning.

    <p>False</p> Signup and view all the answers

    Which of the following is a frequently cited criticism of formal planning?

    <p>Plans lock organizations into rigid goals and timetables.</p> Signup and view all the answers

    Planning gives organizations a way to deal with change that ________.

    <p>Reduces uncertainty</p> Signup and view all the answers

    Once SWOT analysis is complete, managers ________ to address the issues that came up during the analysis.

    <p>Formulate strategies</p> Signup and view all the answers

    A company whose goal is to retain its ideal size and market share is employing which kind of strategy?

    <p>Stability</p> Signup and view all the answers

    Studies of performance in organizations that plan have reached ________ with respect to the benefits of formal planning.

    <p>Generally positive conclusions</p> Signup and view all the answers

    A corporate strategy focuses primarily on ________.

    <p>An organization's mission</p> Signup and view all the answers

    In forward vertical integration, a company becomes its own ________, while in backward vertical integration, the company is its own ________.

    <p>Distributor; supplier</p> Signup and view all the answers

    An external analysis, the second step of the strategic management process, helps identify ________.

    <p>A company's opportunities and threats</p> Signup and view all the answers

    SWOT analysis includes the identification of an organization's strengths, weaknesses, opportunities, and threats.

    <p>True</p> Signup and view all the answers

    Planning is concerned with ________.

    <p>Both ends and means</p> Signup and view all the answers

    A key function of planning is to create goals.

    <p>True</p> Signup and view all the answers

    Which of the following is NOT a function of planning?

    <p>Settling disputes between employees</p> Signup and view all the answers

    The first step in the six-step strategic management process is to ________.

    <p>Identify the organization's mission</p> Signup and view all the answers

    Competitive advantages for a high-prestige, premium coffee franchise like Starbucks are likely to include all of the following EXCEPT ________.

    <p>Lowest prices</p> Signup and view all the answers

    Which of the following is LEAST likely to be a decision criterion for a high-performance bicycle buyer who cares primarily about performance?

    <p>Warranty</p> Signup and view all the answers

    A manager is considering purchasing new computers for her department, and is spending time assessing the computers her department has now. What stage is she in?

    <p>Identification of a problem</p> Signup and view all the answers

    Which of the following is NOT a reason why managers often resort to using heuristics?

    <p>They thoroughly explain all alternatives.</p> Signup and view all the answers

    Study Notes

    Decision-Making Process

    • The final step in decision-making is appraising results, not implementation.
    • Decision makers face three conditions: certainty, risk, and uncertainty.

    Groupthink and Decision Making

    • Groupthink is characterized by conformity among members, often leading to consensus at the expense of open discussion.
    • Programmed decisions rely on past successful solutions, avoiding mistakes and innovative approaches.

    Types of Problems

    • Structured problems are clear and well-defined, providing complete information.
    • Unprogrammed decisions involve more complex interpretations, often influenced by policies.

    Satisficing vs. Maximizing

    • "Satisficing" is not synonymous with "maximizing"; the two represent different approaches to decision-making.
    • Maximizing value means achieving the best possible outcome for all parties involved.

    Decision Criteria and Errors

    • Decision criteria define relevant factors in the decision-making process.
    • Key errors in decision-making include confirmation bias, where only supportive evidence is considered, and sunk costs, which focus on past investments rather than future benefits.

    Planning in Organizations

    • Planning aims to reduce uncertainty and serves to create clear goals. It encompasses both ends (goals) and means (methods to achieve goals).
    • Formal planning is found to generally lead to positive outcomes, including increased profits.

    Corporate Strategies

    • Stability strategies focus on maintaining market share without seeking growth.
    • SWOT analysis identifies strengths, weaknesses, opportunities, and threats to formulate strategies.

    Vertical Integration

    • Forward vertical integration gives a company control over distribution, while backward vertical integration grants control over suppliers.

    Performance and Decision-Making

    • Traits like warranty or frame composition affect decision-making for bicycles, with performance-focused buyers prioritizing functionality over warranty.
    • Managers identify problems by comparing current states to established standards or goals, which informs the entire strategic process.

    Heuristics in Decision-Making

    • Heuristics serve as shortcuts that aid decision-making but may overlook comprehensive exploration of all options.
    • Managers prefer heuristics to simplify complex situations, save time, and reduce ambiguity.

    Strategy Formulation

    • The first step in the strategic management process is identifying the organization's mission, followed by analyzing strengths and weaknesses.
    • The ultimate goal of SWOT analysis is to formulate strategies based on an organization’s internal and external environments.

    Biases in Decision Making

    • Decision-making biases can skew judgment, where traits like overconfidence may lead to misestimations of abilities and outcomes.

    Performance Analysis

    • Research indicates that effective formal planning correlates with higher organizational success and improved financial performance.### Decision-Making Concepts
    • Unstructured problems require subjective judgment where information is incomplete, exemplified by choosing an executive's wardrobe.
    • Procedures involve a series of detailed steps for problem resolution, like assembling exercise equipment, differing from rules that dictate single actions.
    • Certainty in decision-making occurs when all outcomes and alternatives are known; contrastingly, risk and uncertainty involve varying degrees of known information.
    • Group decisions gain legitimacy when made democratically, promoting broader acceptance than decisions made solely by a leader or expert.

    Strategic Management

    • Cost leadership strategy focuses on offering basic, practical items, while differentiation emphasizes unique and high-quality products.
    • Tactical plans concentrate on how to achieve overarching goals rather than defining those goals themselves, unlike strategic plans which outline the broader organizational objectives.
    • Competitive advantage arises from differentiating from competitors by either offering unique products or providing better value.

    Organizational Strategies

    • Organizations develop corporate strategies to define business focus, which can include growth, stability, or renewal approaches, with growth involving concentration, diversification, and integration.
    • Competitive strategies detail how an organization competes—cost leadership, differentiation, or focus strategy.
    • The Means-End Chain illustrates how achieving lower-level goals supports higher-level objectives, creating a structured approach to goal fulfillment.

    Biases in Decision-Making

    • Heuristics represent cognitive shortcuts in decision-making that simplify processes but can lead to biases such as overconfidence, anchoring, confirmation, and selective perception.
    • Bounded rationality indicates the limits on knowledge and decision-making capacity, making it difficult to consider all possibilities.
    • Availability bias results from recent events influencing perceptions disproportionately, while self-serving bias involves attributing outcomes to external factors to protect self-image.

    Plan Types and Conditions

    • Structured problems are straightforward and familiar, while unstructured problems are new and undefined. Programmed decisions follow repetitive procedures, whereas non-programmed decisions require custom solutions.
    • Tactical plans specify actions to realize broader objectives while directional plans offer flexible guidelines for operations.
    • Strategic goals focus on organizational-level objectives beyond financial metrics, adapting to environmental uncertainties.

    Evaluation and Commitment

    • Decision-making processes involve several stages from problem identification to evaluation, ensuring comprehensive analysis at each step.
    • Satisficing means accepting a solution that meets sufficient standards rather than striving for the optimal outcome.
    • Escalation of commitment refers to continued investment in a failing decision despite evidence suggesting otherwise.

    Competitive Strategies

    • Benchmarking assesses firm performance against peers to identify improvement areas and implement strategic changes.
    • Growth strategies can be achieved through diversification, as seen in acquisitions like Yahoo's purchase of Tumblr.
    • The two primary integration strategies—horizontal and vertical—focus on enhancing competitive positioning through resource consolidation.

    Cognitive Biases

    • Representation bias can distort decision-making perceptions by inaccurately paralleling current situations with unrelated events.
    • Emphasis on the most recent information can lead to availability bias, skewing judgment toward the immediate past experiences.

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