Management Concepts and Decision-Making Quiz

Managerial Decision Making

• Decision making is the process where managers react to opportunities and threats.
• This includes analyzing options, and forming decisions about goals and courses of action.
• Decisions responding to opportunities aim to enhance organizational performance.
• Decisions responding to threats arise when adverse events affect the organization.

Types of Decisions

• Programmed decisions are routine and largely automatic.
• Managers have made similar decisions repeatedly in the past, often with clear rules or guidelines.
• An example is reordering office supplies.
• Non-programmed decisions deal with unusual situations not encountered before.
• No pre-set rules; these rely on managerial information, intuition, and judgment.
• An example is whether a company should invest in a new technology.

The Classical Model

• This is a prescriptive model that dictates how a decision should be made.
• It assumes managers have complete information.
• Ideally, managers rank their preferences amongst options and select the best course.
• In reality, access to complete information is often impossible.

The Administrative Model

• This model challenges the classical model's assumptions.
• It recognizes that managers don't always have complete information.
• Bounded rationality recognizes that a multitude of options and data makes fully considering all factors difficult.
• Incomplete information arises from various factors, like uncertainty and risk, or ambiguous information.

Why Information is Incomplete

• Risk implies a known probability of a given outcome failing or succeeding.
• Uncertainty indicates unknown probabilities for outcomes.
• Ambiguous information lacks clear meaning.
• Time constraints and/or high information costs restrict exhaustive option searches.
• It often leads managers to decide based on insufficient information, hence satisficing (accepting acceptable options rather than optimal ones).

Decision Making Steps

• Recognize the need for a decision.
• Frame the problem.
• Generate and assess alternatives.
• Choose among alternatives.
• Implement the chosen alternative.
• Learn from feedback.

Evaluating Alternatives

• Is the alternative course of action legal?
• Is the course of action ethical?
• Is the alternative economically feasible?
• Is the alternative practical to implement?

Cognitive Biases

• Heuristics are rules of thumb used to simplify complex situations.
• Prior hypothesis bias suggests pre-existing beliefs influence decision-making.
• Representativeness involves incorrectly generalizing decisions from small samples.
• Illusion of control overestimates a manager's impact over events.
• Escalating commitment involves excessive investment in a project even after negative feedback.

Group Decision Making

• Group think refers to biased decision-making in groups because of pursuing agreement.
• Managers may rally around a central idea, disregarding alternatives.

Improved Group Decision Making

• Devil's advocacy involves one member critically evaluating the decision process.
• Dialectical inquiry pairs competing groups for argument and counter-argument.
• Promote diversity to consider different views to enhance options

Organizational Learning & Creativity

• Organizational learning improves member understanding of the organization and its environment to raise effectiveness.
• Creativity involves finding novel ideas for a viable action course.

Senge's Learning Organization

• Personal Mastery (developing employees' learning and exploration)
• Mental Models (challenge employees to discover better methods)
• Shared Vision (a firm-wide approach to firm evaluation)
• Systems Thinking (understanding how actions in one area impact others throughout the firm).

Individual Creativity

• For creativity to thrive, the organization must support it.
• Risk-taking is essential for creative thought; however, periodic failures should be acceptable and even encouraged.

Building Group Creativity

• Brainstorming elicits diverse options without initial evaluation.
• Production Blocking happens when members can't process all ideas presented.

Building Group Creativity (continued)

• Nominal group technique creates structured written submissions to avoid production blocking.
• Delphi technique utilizes written submissions to gather and refine ideas from diverse group members, even across significant geographic distance.

The Manager as a Planner and Strategist

• Planning identifies and selects organizational goals and courses of action.
• The organizational plan from the planning process outlines the objectives.
• The pattern of managerial decisions to achieve these goals forms the organization's strategy.

Three Stages of Planning

• Determining mission and goals (defining the business)
• Strategy formulation (analysing current conditions and developing strategies)
• Strategy implementation (allocating resources and responsibilities to execute strategies).

Planning Process Stages

• Organizational Mission: the overall goal.
• Strategy Formulation: assessing the situation and creating strategies to fulfill the mission.
• Strategy Implementation: allocating resources to execute the formulated corporate strategy.

Levels of Planning

• Corporate: done by top management, considers where to operate; provides a framework.
• Business: done by divisional managers, identifies how each division will reach corporate goals and how to compete.
• Functional: done by department heads; shows how departments will help execute business-level strategies.

Planning at General Electric (Example)

• Demonstrates hierarchical planning.
• Shows the links between different managerial levels for setting goals and executing strategic plans.

Planning Levels (continued)

• Top-level planning is done by top managers who also approve business and functional-level plans.

Characteristics of Plans

• Time horizon (long-term, intermediate-term, short-term)
• Standing Plans - programmed decisions (e.g., policies, rules, SOPs);
• Single-use plans - non-programmed decisions (e.g., programs, projects).

Who Plans?

• Corporate-level planning is done by top managers.
• Business and functional level planning is done by divisional and department managers.

Why Planning is Important

• Planning defines the organization's present and future direction; defines purpose; it coordinates the firm, and ensures control.

Scenario Planning

• Generates forecasting of future conditions, analysing how to react effectively.
• Prepares for unforeseen events, improves planning adaptability.

Determining Mission and Goals

• Defining the business is the first step, identifying customers' requirements and competing corporations.
• Establishing major goals means determining who the firm is targeting in the business market.

Mission Statements

• Compaq - transforms computing into intuitive practices in all possible areas.
• AT&T - connects people and offers services globally.

Strategy Formulation

• SWOT analysis identifies strengths and weaknesses, and opportunities and threats.
• Managers use SWOT analysis to develop successful strategies.

Strategy Formulation (continued)

• SWOT Analysis - identify strengths, weaknesses, opportunities, and threats.
• The Five Forces Model - identifies the competitive forces (rivalry, supply, customers, opportunities, etc).

Corporate-Level Strategies

• Concentrate on a single business (e.g., McDonald's).
• Diversify to new businesses and services.
• Related diversification (similar business areas).
• Unrelated diversification (different business areas).

International Strategy

• Global strategy - standardized approach to products and markets—focuses on low cost.
• Multidomestic strategy - customized approach to products and markets—focuses on responsiveness.

Vertical Integration

• Backward - producing inputs (e.g., McDonalds growing potatoes).
• Forward - distributing outputs (e.g., McDonalds owning restaurants).

Vertical Value Chain

• Raw materials, intermediate manufacturing, assembly, distribution.

Business-Level Strategies

• Low cost, differentiation, focused low cost, focused differentiation.

Business Strategies (continued)

• Low cost – lower production costs compared to competitors.
• Differentiation – unique product qualities.

Business Strategies (continued)

• Firms focus on serving either the entire market or a specific portion of the market (e.g., focused low cost, focused differentiation).

Functional-Level Strategies

• Each department and functional area improves the value of the product and service.
• This can involve reducing operational costs or enhancing product features.

Goals for Successful Functional Strategies

• Superior Efficiency - maximizing output for inputs.
• Superior Quality - delivering products as expected.
• Superior Innovation - developing cutting edge product features and processes.
• Superior Responsiveness - customer-focused products, services and processes.

This quiz explores essential management concepts, including the Delphi Technique, planning processes, and decision-making strategies. Test your knowledge on organizational learning, creativity, and the role of diversity in effective management. Perfect for students and professionals looking to enhance their understanding of management dynamics.