Decision-Making Process Overview

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Questions and Answers

What is the decision-making process?

The process of identifying and choosing alternative courses of action in an appropriate manner given the demands of a situation.

Which of the following is a part of the decision-making process?

Analyze the Environment (correct)

Evaluate Alternatives (correct)

Set Organizational Goals

Diagnose the Problem (correct)

Internal limitations include factors such as marketing and financial aspects.

False

The process involves evaluating alternatives in terms of their value, cost, and _____ characteristics.

risk Signup and view all the answers

What does the Economic Order Quantity Model calculate?

The number of items that should be ordered at one time Signup and view all the answers

What is the purpose of qualitative evaluation in problem-solving?

Subjective analysis based on intuition. Signup and view all the answers

According to Nickels and others, what is planning?

A management function that involves anticipating trends Signup and view all the answers

Strategic planning is performed at the lower management level.

False Signup and view all the answers

What is one of the barriers to planning mentioned?

Manager's inability to plan Signup and view all the answers

What is the decision-making process?

The process of identifying and choosing alternative courses of action in an appropriate manner given the demands of a situation. Signup and view all the answers

Which of the following are steps in the decision-making process? (Select all that apply)

Make a Choice Signup and view all the answers

Internal limitations do not affect decision-making.

False Signup and view all the answers

Match the following quantitative models with their purpose:

Economic Order Quantity Model = Calculate order quantity to minimize costs Queuing Theory = Minimize customer waiting time and cost of service Back Order Inventory Model = Planning shortages Quantity Discount Model = Minimize cost with quantity discounts Signup and view all the answers

What is qualitative evaluation?

Subjective, intuition-based assessment. Signup and view all the answers

What is operational planning?

Determining how specific tasks can be best accomplished on time with available resources. Signup and view all the answers

What does feedback refer to in the decision-making process?

The process that requires checking at each stage of decision-making. Signup and view all the answers

The process of determining the number of service units to minimize costs is known as _____ Theory.

Queuing Signup and view all the answers

Study Notes

Decision-Making Process

Diagnose the Problem: The first step in decision making is to identify the problem.
Analyze the Environment: Identifying constraints is important to properly analyze the environment.
- Internal Limitations: Limited resources (funds, training, facilities, patents), limited market, and strict enforcement can hinder decision-making.
- External Limitations: Factors like organizational structure, marketing, personnel, production, finances, government regulations, labor unions, suppliers, banks, public perception, competitors, clients, and engineers can impact decision-making.
Articulate the Problem: Clearly communicating the problem is crucial.
Develop Viable Alternatives: Creating a list of possible solutions is a necessary step.
- Viability Assessment: Evaluating the feasibility of each solution is important.
- Revision: Non-viable alternatives should be removed from the list.
Evaluate Alternatives: A proper evaluation process is crucial for choosing the right solution.
- Analysis: Each alternative's value, cost, and risk characteristics should be thoroughly analyzed.
- Value: The expected benefits of each alternative should be considered.
- Cost: Out-of-pocket costs, opportunity costs, and potential follow-on costs need to be assessed.
- Risk Characteristics: The likelihood of achieving the desired outcomes for each alternative should be evaluated.
Make a Choice: Selecting the best option from the evaluated alternatives.
Implement Decision: Carrying out the chosen decision to achieve the desired objectives.
Evaluate and Adapt Decision Results: Regularly assessing and improving the decision process is essential.
- Desired Result: If the desired outcome is not achieved, identifying the source of the error is crucial for improvement.
- Feedback: Regular feedback throughout the decision-making process is critical.
- Control: Ensuring that the implemented activities align with the planned goals and objectives.

Approaches in Solving Problems

Qualitative Evaluation: Subjective, intuitive approach to problem-solving.
Quantitative Evaluation: Objective, rational, and analytical approach.

Quantitative Models for Decision-Making

Inventory Models: Used to manage and optimize inventory levels.
- Economic Order Quantity Model: Calculates the optimal quantity to order to minimize annual costs.
- Production Order Quantity Model: Applies the EOQ to production orders.
- Back Order Inventory Model: Helps in planning for potential shortages.
- Quantity Discount Model: Minimizes total cost when suppliers offer discounts for larger orders.
Queuing Theory: Determines the optimal number of service units to minimize both customer waiting time and service costs.
Network Models: Break down complex tasks into manageable segments for independent management.

Planning

Provides a structured approach to achieving desired results.
According to Nickels and Others: Planning involves anticipating future trends and developing strategies and tactics to achieve organizational objectives.
According to Aldag and Stearns: Planning is the selection and sequencing of tasks to accomplish organizational goals.
According to Cole and Hamilton: Planning defines what, who, where, when, how, and the standards for tasks.
Planning at Various Management Levels: Different levels of management engage in different types of planning.
- Top Management: Strategic planning focuses on long-term (10 years) goals and involves the entire organization.
- Middle Management: Intermediate planning involves 3-5 years and determines contributions of subunits with allocated resources.
- Lower Management: Operational planning focuses on short-term (1 year) goals and involves how specific tasks are accomplished with available resources.

The Planning Process

Setting Organizational, Divisional, and Unit Goals:
- Goal: A clear and concise statement of desired outcomes, including time and magnitude when possible.
- Strategies: The paths chosen to reach goals and achieve objectives.
- Tactics: Short-term actions to adjust to internal and external influences.
- Resources: Human and non-human resources used to achieve goals.
- Standards: Quantitative or qualitative measures to monitor performance.

Planning Barriers

Challenges managers face include:
- Lack of Commitment: Managers may not be dedicated to the planning process.
- Inadequate Information: Insufficient or unreliable data impedes effective planning.
- Poor Communication: Lack of clear communication hinders coordination and execution.
- Time Constraints: Time pressures can lead to rushed or incomplete planning.
- Lack of Skills: Managers may lack the necessary skills to plan effectively.
- Resistance to Change: People may resist adapting to new plans or processes.
- Unrealistic Goals: Goals that are too ambitious or difficult to achieve can be demoralizing.
- Lack of Creativity: Limited creativity can lead to unoriginal or ineffective plans.
- Fear of Failure: Fear of failure can hinder risk-taking and innovation.

Decision-Making

The process of identifying and choosing alternative courses of action in an appropriate manner given the demands of a situation.
To make a good decision, you need to diagnose the problem, analyze the environment, articulate the problem, develop viable alternatives, evaluate alternatives, make a choice, implement the decision, and evaluate and adapt the decision results.
Analyze the environment by identifying constraints, internal limitations like limited funds, training, facilities, market, enforcement, and external limitations like organizational, marketing, personnel, production, financial aspects, government, unions, suppliers, banks, public, competitors, clients, and engineers.
When making a decision, you should analyze each alternative's value, cost, and risk characteristics.
Implementation refers to carrying out the decision. Feedback refers to checking at each stage of the process. Control refers to ensuring that activities match desired goals.
Two approaches to solving problems are qualitative evaluation (subjective, intuition) and quantitative evaluation (objective, rational, analytical).

Quantitative Models for Decision-Making

Inventory Models:
- Economic Order Quantity Model: Minimizes total yearly cost by calculating the number of items to order at a time.
- Production Order Quantity Model: Applies the EOQ technique to production orders.
- Back Order Inventory Model: Used for planning shortages.
- Quantity Discount Model: Minimizes total cost when suppliers offer quantity discounts.
Queuing Theory: Determines the number of service units that will minimize both customer waiting time and cost of service.
Network Models: Break large complex tasks into smaller segments that can be managed independently.

Planning

A methodical way of achieving desired results.
Provides a way to anticipate future trends and determine strategies and tactics to achieve organizational objectives.
It involves selecting and sequencing tasks to achieve an organizational goal.
Involves deciding what needs to be done, who will do it, where, when, how, and by what standard it will be done.

Planning at Various Management Levels

Top Management Level (Strategic Planning): Determines major goals of the organization, considering the whole company, its objectives, and current resources; plan for 10 years.
Middle Management Level (Intermediate Planning): Determines how subunits can contribute with allocated resources; plan for 3-5 years.
Lower Management Level (Operational Planning): Determines how specific tasks can be best accomplished on time with available resources; plan for 1 year.

The Planning Process

Setting Organizational, Divisional, and Unit Goals:
- Goal: A specific statement of results sought, quantified in time and magnitude where possible.
- Strategies: Ways to reach the goals, a course of action to ensure the organization achieves its objectives.
- Tactics: Short-term actions to adjust to internal and external influences.
- Resources: Human and nonhuman resources.
- Standards: Quantitative and qualitative measuring devices designed to help monitor the performance of people, capital goods, or processes.

Planning Barriers

Manager's inability to:
- Think strategically: Focus on long-term goals.
- Clearly communicate goals: Effectively convey organizational objectives to employees.
- Develop action plans: Create detailed plans to achieve goals.
- Adapt to change: Adjust plans to reflect changing circumstances.
- Be creative: Generate innovative solutions to problems.
- Overcome resistance to change: Persuade individuals and groups to accept and implement changes.
- Avoid tunnel vision: Consider all aspects of a situation before making decisions.

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Description

This quiz explores the critical stages of the decision-making process, including problem diagnosis, environmental analysis, and the articulation of viable alternatives. Understand the internal and external limitations that can affect decision-making and discover how to evaluate potential solutions effectively.