Chapter 06 - 2004 by Nelson, a division of Thomson Canada...

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Unformatted text preview: 2004 by Nelson, a division of Thomson Canada Limited 1 Chapter 6 Decision-Making 2004 by Nelson, a division of Thomson Canada Limited 2 What Would You Do? Low gas prices lead to lower profits Lower profits lead to employee layoffs Exploration needs continue How will you convince top management to approve the risky deepwater drilling? 2004 by Nelson, a division of Thomson Canada Limited 3 Learning Objectives: What is Rational Decision-Making? After reading these next two sections, you should be able to: 1. explain the steps to rational decision- making 2. discuss the limits to rational decision- making 2004 by Nelson, a division of Thomson Canada Limited 4 Steps to Rational Decision-Making 1. Define the problem 2. Identify the decision criteria 3. Weight the criteria 4. Generate alternative courses of action 5. Evaluate each alternative 6. Compute the optimal decision Adapted from Exhibit 6.1 2004 by Nelson, a division of Thomson Canada Limited 5 Define the Problem A problem is a gap between a desired state and an existing state To make decision to solve problems, managers must: be aware of the gap be motivated to reduce the gap have the knowledge, skills, abilities, and resources to fix the problem 2004 by Nelson, a division of Thomson Canada Limited 6 Identify Decision Criteria Decision criteria are standards used to guide judgments and decisions generally, the more criteria a solution meets, the better that solution will be 2004 by Nelson, a division of Thomson Canada Limited 7 Weight the Criteria Which criteria are more or less important? Absolute comparisons each criterion is compared to a standard or ranked on its own merits Relative Comparisons each criterion is compared directly to every other criterion 2004 by Nelson, a division of Thomson Canada Limited 8 Absolute Weighting of Decision Criteria for a Car Purchase Performance Criteria Starting/acceleration Fuel efficiency Handling/steering Transmission Ride quality braking Design Criteria Overall look Interior Seats Accessories Cargo space Fit and finish 2004 by Nelson, a division of Thomson Canada Limited 9 Criteria Used to Evaluate Best Company Locations Commuting distance Operating costs Tax rates Education level Labour costs Housing costs Adapted from Exhibit 6.4 2004 by Nelson, a division of Thomson Canada Limited 10 Rankings of Cities by Selection Criteria Values Regina 6.10 Saskatoon 5.40 Saint John 5.35 Halifax 5.05 Winnipeg 4.25 Edmonton 3.75 Calgary 3.40 Ottawa 2.75 Adapted from Exhibit 6.5 2004 by Nelson, a division of Thomson Canada Limited...
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Chapter 06 - 2004 by Nelson, a division of Thomson Canada...

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