BM Unit 1 - LO3 1
Higher Business Management
Unit 1Learning Outcome 3
Decision-making in Business
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The Nature of Decisions
What to produce? Where to locate? Methods of production? How many employees? What price to charge?
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Types of Decisions
Strategic - the long-term aims of the business
Tactical - setting out the objectives; more short-term; how to achieve the strategic aims
Operational - day-to-day decisions on how to achieve the objectives
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Review/Evaluation/Alteration
REVIEW EVALUATE
ALTER
There must be a continuous process of review in order to respond to change.
Take, for example, how airlines across the world reacted after the terrorist attacks on America.
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Who Makes the Decisions?
Strategic Owner/senior management
Tactical As above or middle management
Operational Junior management, section
heads or even individual workers
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Mission Statements
A written summary of the strategic aims of an organisation. Well publicised and available to all stakeholders.
Often used in marketing the company’s products or services, eg Body Shop.
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The Role of Managers
Get things done through other people Get things done by using the firm’s
resources Controls and supervises activities in the
organisation Makes decisions about running the
organisation Oversees the work of subordinates Oversees the work of department/s Is accountable to, and carries out the
wishes of, the owner(s) of the organisation
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Functions of Management
Plans Organises Commands Co-ordinates Controls Delegates Motivates
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The GROUP View of Management
Management has conflicting GOALS Managers are held responsible for
RESULTS Managers work in ORGANISATIONS Managers must cope with
UNCERTAINTY Managers work with and through
PEOPLE
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Why Make Decisions?
To achieve the long-term aims of the owners To carry out roles and functions To be able to give clear instructions To give directions and purpose to employees To compare actual performance with
objectives To judge the success or failure of previous
decisions To guide into decisions for the future To modify existing decisions
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Structured Decision-making Model - “POGADSCIE”
Identify the PROBLEM Identify the OBJECTIVES GATHER information ANALYSE information DEVISE alternative solutions SELECT from alternative
solutions COMMUNICATE the decision IMPLEMENT the decision EVALUATE
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Making a Decision
Apply the “POGADSCIE” model to choosing a new digital laptop computer for the staff in your firm.
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IT and Decision-making
Huge storage capacity Vast amounts of information from
the internet Sophisticated software for
processing information Reporting and presentation
packages (PowerPoint) Improved efficiency and lower
costs (less time to find information) Problem of ‘too much’ information?
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SWOT Analysis
Strengths Weaknesses Opportunities Threats
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Internal Factors
Strengths
THE FIRM
Weaknesses
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External Factors
Threats
Opportunities
THE FIRM
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A SWOT Grid
Weaknesses Present
External Opportunities Threats Future
StrengthsInternal
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Problems of Using a Structured Model
The time scale required The ability to collect all the
information Generating alternative
solutions Lack of creativity
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Benefits of Using a Structured Model
The time scale required The quality/quantity of the
information you have The availability of alternative
solutions Enhances innovation and
responsiveness
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Aids to Decision-making
Brainstorming This be a very useful way to generate
and create ideas
Pest Analysis Political, economic, social and cultural
external constraints on decision-making (you could add the environment here)
NB Pest and Swot often used together to identify opportunities and threats
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Factors Affecting the Quality of Decisions
Quality and quantity of information used
Training of staff in decision-making
Risk-taking The human element