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2300 book notes - Chapter 5 Decision Making Learning...

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Chapter 5 Decision Making, Learning, Creativity, and Entrepreneurship Decision Making - the process by which managers respond to opportunities and threats by analyzing the options and making determinations, or decisions, about specific organizational goals and courses of action o decision making in response to opportunities occurs when managers search for ways to improve organizational performance to benefit customers, employees, and other stakeholder groups o decision making in response to threats occurs when events inside or outside the organization adversely affect organizational performance and managers search for ways to increase performance Programmed and Non-Programmed Decision Making o Programmed Decision Making - routine, virtually automatic, decision making that follows established rules or guidelines o Nonprogrammed Decision Making - nonroutine decision making that occurs in response to unusual, unpredictable opportunities and threats ! rules do not exist because the situation is unexpected or uncertain and managers lack the information they would need to do develop rules to cover it ! intuition - feelings, beliefs, and hunches that come readily to mind, require little effort and information gathering, and result in on-the-spot decisions often managers use intuition to make nonprogrammed decisions ! reasoned judgments - decisions that require time and effort and results from careful information gathering, generation of alternatives, and evaluation of alternatives Different models o Classical Decision Making model ! a prescriptive approach based on the assumption that the decision maker can identify and evaluate all possible alternatives and their consequences and rationally choose the most appropriate course of action assumes managers have all info to make the optimum decision - the most appropriate decision in light of what managers believe to be the most desirable consequences for the organization ! lists all alternatives, ranks all alternatives, selects alternative that leads to desired future consequences o Administrative Model ! explains why decision making is inherently uncertain and risky and why managers usually make satisfactory rather than optimum decisions ! bounded rationality - cognitive limitations that constrain one's ability to interpret, process, and act on information
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the number of alternative sis so great that it is difficult to evaluate all before coming to a decision ! incomplete information - full range of decision making alternatives is unknowable and consequences associated with alternatives is uncertain DUE TO risk and uncertainty, ambiguity, and time constraints risk and uncertainty o risk - the degree of probability that the possible outcomes of a particular course of action will occur o uncertainty - unpredictability o ambiguous information - formation that can be interpreted in multiple and often conflicting ways o time constraints and information costs ! satisficing - searching for and choosing an acceptable, or satisfactory,
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