Student Chapter03 - Making Decisions Prentice Hall, Chapter...

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Unformatted text preview: Making Decisions Prentice Hall, Chapter 3 1 Learning Objectives • Explain the six-step rational decisionmaking model • Contrast risk with uncertainty • Display increased creativity in your decisions • Examine popular quantitative decisionmaking techniques Prentice Hall, Chapter 3 2 Learning Objectives • Contrast conditions which favor individual decisions with those favoring groups • Examine bounded rationality in decision making • Identify four decision-making styles • Explain how managers can improve decision making Prentice Hall, Chapter 3 3 Rational Decision-Making Model 2 4 TECH A1 + A1 Set Decision Criteria 1 5 A2 A1 A2 A2 6 A3 Problem Identify and Define Problem 3 Make Optimal Decision A4 Criteria Weight the Criteria Prentice Hall, An Generate Alternatives Chapter 3 Choice An An Evaluate Alternatives 4 Assumptions of the Model One: One: Four: Four: Problem Clarity Constant Preferences Two: Two: Five: Five: Known Options No Constraints Three: Three: Six: Six: Clear Preferences Prentice Hall, Chapter 3 Maximum Payoff 5 Decision­Making Conditions Certainty Risk Uncertainty Prentice Hall, Chapter 3 6 Creativity Creative Potential Prentice Hall, Chapter 3 Stimulating Creativity 7 $90,000 Breakeven Analysis 80,000 Profit Area Revenue/Cost($) 70,000 Total Revenue 60,000 Breakeven Point 50,000 40,000 Total Costs Variable Costs 30,000 20,000 Loss Area 10,000 Fixed Costs Output (in thousands) 100 Prentice Hall, 200 300 Chapter 3 400 500 600 8 Other Quantitative Methods Return on Return Investment Investment Marginal Analysis Game Theory Linear Linear Programming Programming Queuing Theory Prentice Hall, Chapter 3 9 Individual Versus Group Decision Making Strengths of Individuals Strengths of Groups Speed Input and Diversity Clear Accountability Higher-Quality Decisions Consistent Values Increased Acceptance Prentice Hall, Chapter 3 10 Decision-Making Level Ill-Structured Top Level Type Nonprogrammed Decisions Programmed Programmed Decisions Well-Structured Prentice Hall, Lower Chapter 3 11 A Model of Bounded Rationality Ascertain the Need the for a Decision for Set “Satisficing” Criteria Identify a Limited Set Limited of Alternatives of Compare Alternatives Against Criteria Simplify the Problem Prentice Hall, Expand Search for Alternatives Chapter 3 No Select the First “Good Enough” Choice A “Satisficing” Alternative Exists 12 Yes The Role of Intuition Previous Experience Prentice Hall, “Gut­Level Feeling” Chapter 3 Accumulated Judgment 13 Image Theory Principles & Values Images Goals& Plans Compatibility Tests Profitability Context Frames Prentice Hall, Presentation Chapter 3 14 Identify Problems Phases of Decision Making Develop Alternatives Implement Solutions Prentice Hall, Chapter 3 15 Making Appropriate Choices Making Appropriate Choices Availability Availability Heuristic Heuristic Representative Representative Heuristic Heuristic Escalation of Escalation of Commitment Commitment Prentice Hall, Chapter 3 16 Decision­Making Styles Tolerance for Ambiguity High Analytic Conceptual Directive Behavioral Low Rational Prentice Hall, Way of Thinking Chapter 3 Intuitive 17 Levels of Moral Development Development Level Stage Description 6. Follow self-chosen principles Principled 5. Uphold absolute values and rights Conventional 4. Fulfill agreed-upon obligations Preconventional 2. Serve immediate self-interest Prentice Hall, 3. Fulfill expectations of others Chapter 3 1. Avoid physical punishment 18 Performance Evaluations Reward Systems Organizational Constraints Historical Precedents Prentice Hall, Time Constraints Chapter 3 19 Time Orientation The Value of Rationality Cultural Differences Groups or Individuals Prentice Hall, Problem Identification Chapter 3 20 Improving Decision Making • Analyze the situation • Acknowledge biases • Blend analysis and intuition • Match decision making with job requirements • Stimulate creativity Prentice Hall, Chapter 3 21 Ethical Decision Guidelines How did this problem occur? Could you define the problem differently? To whom or what are you loyal? What is your intention in making this decision? Could your intentions be misunderstood? How does your intention compare with the likely outcome? Whom could your decision injure? Can you talk to those who will be affected before deciding? Are you confident in the long-run validity of your position? Could you disclose your decision to your boss or family? Would you like for your decision to be headline news? Prentice Hall, Chapter 3 22 ...
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