Decision Making Approaches in Management

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Questions and Answers

In decision making, what two main types of problems may a manager face?

Simple or complex

What are the two main approaches to decision making?

Analytical and intuitive

Subjective and objective

Qualitative and quantitative (correct)

Rational and emotional

Which of the following situations might a manager choose to use qualitative evaluation?

The problem requires a lot of research and data analysis

The problem is very complex and unfamiliar

The costs involved are significant and require careful consideration

A quick decision is needed, and the problem is fairly straightforward (correct)

Quantitative evaluation utilizes any technique that can be classified as logical and analytical.

True Signup and view all the answers

Which of the following is NOT a type of inventory model?

Cost-Benefit Analysis Signup and view all the answers

What is the goal of queuing theory?

Determine the number of service units needed to minimize customer waiting time and cost of service Signup and view all the answers

What is the purpose of Network Models in decision-making?

To break down large, complex tasks into smaller, manageable segments Signup and view all the answers

The ______ technique helps managers schedule, monitor, and control large and complex projects.

PERT Signup and view all the answers

Which time estimate refers to the time an activity might be completed under ideal conditions?

Optimistic Time Estimate Signup and view all the answers

The Critical Path Method uses a single time factor for each activity to determine the most efficient path to complete a project.

True Signup and view all the answers

What is the purpose of forecasting and predicting?

To make decisions today that will have implications in the future Signup and view all the answers

What are the two types of regression analysis?

Simple or multiple Signup and view all the answers

What is the main purpose of simulation in decision-making?

To represent reality and test conclusions about real-life problems Signup and view all the answers

What is the objective of linear programming?

To produce an optimal solution while considering constraints Signup and view all the answers

Sampling theory uses statistical methods to select samples from a population for various purposes, such as quality control and market research.

True Signup and view all the answers

What is the goal of Statistical Decision Theory?

To provide a structured framework for analyzing and solving problems in situations with limited information Signup and view all the answers

Study Notes

Decision Making Approaches

Managers face problems that can be simple or complex.
Qualitative evaluation uses intuition and subjective judgment.
- This approach is useful when problems are simple and familiar.
- Costs are not significant.
- Immediate decisions are needed.
Quantitative evaluation uses various techniques that are considered rational and analytical.

Quantitative Techniques in Decision Making

Inventory Models
- Economic Order Quantity (EOQ) Model: Calculates the order quantity to minimize yearly costs of placing orders and holding inventory.
- Production Order Quantity Model: An economic order quantity technique for production orders.
- Back Order Inventory Model: An inventory model used for planned shortages.
- Quantity Discount Model: An inventory model used to minimize costs when suppliers offer quantity discounts.
Queuing Theory
- Describes how to determine the number of service units needed to minimize customer wait times and service costs.
Network Models
- Large complex tasks are broken into manageable segments.
- The two most prominent models are mentioned. (details omitted)
Program Evaluation and Review Technique (PERT)
- Used to schedule, monitor, and control large, complex projects.
- PERT times are estimated completion times for each task or activity.
  - Optimistic Time Estimate: Best-case completion time
  - Most Likely Time Estimate: Normal Completion Time
  - Pessimistic Time Estimate: Worst-case completion time
- Critical Path Method (CPM): Uses one time factor per activity to help schedule, monitor, and control projects. Identifies the critical path (the longest potential path to complete a project)
Forecasting
- Managers must consider future implications of decisions.
Regression Analysis
- A forecasting method used to examine relationships between variables.
- Can be simple or multiple regression depending on the number of independent variables.
Simulation
- A model used to represent reality to arrive at conclusions about real-life problems.
- A sophisticated tool that allows decision-makers to develop mathematical models of the system under consideration.
Linear Programming
- A quantitative technique used to find the optimum solution within constraints imposed on a decision.
Sampling Theory
- A quantitative technique using samples from populations to statistically determine useful data for processes such as quality control and research.
Statistical Decision Theory
- A rational method to analyze and solve problems with limited information about the decision environment.

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Description

Explore various decision-making approaches used by managers, focusing on qualitative and quantitative evaluations. Learn about quantitative techniques such as inventory models and queuing theory, which help optimize decision-making in simple and complex scenarios.