Decision-Making and Planning PDF

# Chapter 2: Decision-Making The process of identifying and choosing alternative courses of action in an appropriate manner given the demands of a situation. ## Decision-Making Process: - **Diagnose the Problem**: Identify the problem. - **Analyze the Environment**: Identify constraints. - **...

# Chapter 2: Decision-Making The process of identifying and choosing alternative courses of action in an appropriate manner given the demands of a situation. ## Decision-Making Process: - **Diagnose the Problem**: Identify the problem. - **Analyze the Environment**: Identify constraints. - **Internal Limitations**: Limited funds, limited training, ill-designed facilities, patents are controlled, limited market, strict enforcement - **External Limitations**: Organizational aspect, marketing aspect, personnel aspect, production aspect, financial aspect, government, labor unions, suppliers, banks, public, competitors, clients, engineers - **Internal Environment**: - Marketing Aspect - Personnel Aspect - Production Aspect - Financial Aspect - Government - Labor Unions - Suppliers - Banks - Public - Competitors - Clients - Engineers - **External Environment**: - **Articulate the Problem**: Discuss. - **Develop Viable Alternatives**: - Prepare a list of viable alternatives. - Determine the viability of each solution. - Revise the list by striking out those which are not viable. - **Evaluate Alternatives**: - Proper evaluation makes choosing the right solution less difficult. - Each alternative must be analyzed and evaluated in terms of its value, cost, and risk characteristics. - **Value:** Benefits that can be expected. - **Cost:** Out-pocket costs, opportunity costs, and follow-on costs - **Risk Characteristics:** Likelihood of achieving the goals of the alternatives. - **Make a Choice**: - **Choice-making**: Process if selecting among alternatives, representing potential solutions to a problem. - **Implement Decision**: - **Implementation**: Refers to carrying out the decision so that the objectives sought will be achieved. - **Evaluate and Adapt Decision Results**: - "If the desired results is not achieved, you should focus in determining where error was made". - Ferrell and Hirt - **Feedback:** Refers to the process which requires checking at each stage of the process. - **Control**: Refers to actions made to ensure that the activities performed match the desired activities or goals. ## Approaches In Solving Problems: - **Qualitative Evaluation**: Subjective, Intuition - **Quantitative Evaluation**: Objective, rational and analytical ## Quantitative Models for Decision-Making: ### 1. Inventory Models: - **Economic Order Quantity Model**: Used to calculate the number of items that should be ordered at one time to minimize the total yearly cost. - **Production Order Quantity Model**: Economic order quantity technique applied to production orders. - **Back Order Inventory Model**: Used for planning shortages. - **Quantity Discount Model**: Used to minimize the total cost when quantity discounts are offered by suppliers. ### 2. Queuing Theory: - Determine the number of service units that will minimize both customer waiting time and cost of service. ### 3. Network Models: - Models where large complex tasks are broken into smaller segments that can be managed independently. # Chapter 3: Planning Technical Activities ## Planning: - Provides a methodical way of achieving desired results. - **According to Nickels and Others**: "A management function that involves anticipating future trends and determining the best strategies and tactics to achieve organizational objectives." - **According to Aldag and Stearns**: "The selection and sequential ordering of tasks required to achieve an organization goal." - **According to Cole and Hamilton**: "Deciding what will be done, who will do it, where, when and how it will be done, and the standard to which it should be done." ## Planning at Various Management Levels: ### 1. Top Management Level: Strategic Planning - Determining major goals of the organization; the whole company is considered, including its objectives and current resources; plan for 10 years. ### 2. Middle Management Level: Intermediate Planning - Determining contributions that subunits can make with allocated resources; plan for 3-5 years. ### 3. Lower Management Level: Operational Planning - Determining how specific task can be best accomplished on time with available resources; plan for 1 year. ## The Planning Process: ### 1. Setting Organizational, Divisional, and Unit Goals - **Goal**: Precise statement of results sought, quantified in time a.nd magnitude, where possible. - **Strategies**: Ways to reach the goals, course of action ensuring that the organization will achieve its objectives. - **Tactics**: Short-term action to adjust to internal and external influences. - **Resources**: Human and nonhuman resources. - **Standards**: Quantitative and qualitative measuring device designed to help monitor the performances of people, capital goods, or processes. ## Planning Barriers - Manager's inability to plan - Improper planning process - Lack of commitment to the planning process - Improper information - Focusing on present at the expense of future - Too much reliance on the planning department - Concentrating only on controllable variables ## Aids to Planning - Gather as much information as possible. - Develop multiple sources of information. - Involve others in the planning process. ## Types of Plans: ### 1. Marketing Plan: - Implementing and controlling company's marketing activities related to particular marketing strategy. ### 2. Production Plan: - Quantity of outputs a company must produce in broad terms and by product family. ### 3. Financial Plan: - Summarizes current financial situation of the firm, analyzes financial needs, and recommends direction for financial activities. ### 4. Human Resources Management Plan: - Human resources needs of the company detailed in quantity and quality and based on requirement of company's strategic plan. ## Plans with Time Horizon: - **Short-Range Plans**: Plans intended to cover a period less than one year. - **Long-Range Plans**: Plans covering a time span of more than one year. ## Plans According to Frequency of Use: ### 1. Standing Plans: - Used again and again, focus on managerial situations that recur repeatedly. - **Policies**: Broad guidelines to aid managers at decision making - **Procedures**: Plans that describe exact series of action to be taken in a given situation - **Rules**: Statements that either require or forbid a certain action. ### 2. Single-Use Plans: - Unique and are unlikely to be repeated. - **Budgets**: Projected expenditure for a certain activity and describe where the required funds will come from. - **Programs**: Designed to coordinate large set of activities - **Projects**: Prepared to support a program. ## Contents of Marketing Plan: - **Executive Summary**: Overall view of the marketing project and its potential - **Table of Contents**: ## Contents of Production Plan: - Amount of capacity the company must have. - How many employees are required - How much materials must be purchased. ## Contents of Financial Plan: - Analysis of firm's current financial condition. - Sales forecast. - Capital budget - Cash budget - Pro forma or projected financial statement - External financing plan ## Contents of Human Resources Plan: - Personal requirements - Plans for recruitment and selection - Training plan - Retirement plan ## Parts of Strategic Plan: - Company or corporate mission - Objectives or goals - Strategies