marketing manager course - chapter 06

McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
6
Chapter
Decision Making
Decision Making
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
After reading this chapter, you should be able to:
z Know how to implement the six stages of management
decision making.
z Apply the criteria of quality and acceptance to a decision.
z Recognize the characteristics of management decisions:
programmability, uncertainty, risk, conflict, and decision
scope.
z Reap the advantages and avoid the disadvantages of
group decision making.
z Develop the skill of time management to allow adequate
time to make decisions.
z Know when to delegate, and do so wisely.
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Introduction
z Making decisions under conditions of risk and
uncertainty is one of the most important activities
that managers engage in.
z Generally, there is a lack of information and a
limited amount of time available to make the
decision.
z Procrastinating and not making a decision
sometimes has greater risk than making it.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Decision Making

z The process of identifying
problems and opportunities and
resolving them.
z Management decisions can be
made by managers, teams, or
individual employees, depending
on:
¾ The scope of the decision, and
¾ The design and structure of the
organization.
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Characteristics of Management
Decision Making
Programmability
Programmability
U ncertainty
U ncertainty
Risk
Risk
C onflict
C onflict
D ecision Scope
D ecision Scope
Crisis
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Characteristics of Management
Decision Making
(Cont)
Programmed Decisions
Programmability

Non-programmed Decisions
Certainty
Uncertainty
Uncertainty
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Characteristics of Management
Decision Making
(Cont)
z Risk – occurs when the outcome of
management decision is uncertain
¾ Risk has both positive and negative aspects
¾ Decision environment for risk vary depending upon company
culture and size
z Conflict – occurs when there are opposing goals,
scares resources, or differences in priorities
z Crisis – a situation that involves small amounts of
time to make a decision that can impact the
survival of the organization
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z Decision Scope – the effect and time horizon of a
decision
z Strategic Decisions – long term perspective of 2-5 years and
affect on the organization
z Tactical Decisions – short term perspective of 1 year or less and
focus on subunits
z Operational Decisions – shortest time perspective, generally
less than a year, often measured on a daily or weekly basis
Characteristics of Management
Decision Making
(Cont)

McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.© 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Stages of Decision Making
Identifying
Identifying
and
and
diagnosing
diagnosing
the problem
the problem
Generating
Generating
alternative
alternative
solutions
solutions
Evaluating
Evaluating
alternatives
alternatives
Selecting
Selecting
the best
the best
alternative
alternative
Implementing
Implementing
the decision
the decision

Evaluating
Evaluating
the decision
the decision
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Typical problems
that require decisions
z A high level of employee turnover.
z A reduction in firm profits.
z Unacceptable levels of “shrinkage” in a store.
z Lower than planned quality of finished goods.
z An unexpected increase in workplace injuries.
z The invention of a new technology that can
increase the productivity of the workforce.
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Evaluating Alternatives
z Decision criteria should be related to the
performance goals of the organization and its
subunits.
z Decision criteria can include:
¾ Costs
¾ Profits
¾ Timeliness
¾ Whether the decision will work
¾ Fairness
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Evaluating Alternatives (continued)
z A practical way to apply decision criteria is to
consider:
¾ Decision quality – aspect of decision making based on such

facts as costs, revenues, and product design specifications.
¾ Decision acceptance – aspect of decision making based on
people’s feelings.
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Approaches to selecting
the best alternative
z Optimizing – selecting the best
alternative from among
multiple criteria.
z Satisficing – selecting the first alternative
solution that meets a minimum
criterion.
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Key factors for
successful implementation
z Providing resources (staff, budgets, office space)
that will be needed for the activities that are required
for successful implementation.
z Exercising leadership to persuade others to move the
implementation forward.
z Developing communication and information
systems that enable management to know if the
decision alternative is meeting its planned objectives.
z Recognition and rewards for individuals and teams
that are successful with implementation.
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Assumptions of the Rational
Decision Making Process
z The problem is clear and unambiguous.
z There is a single, well-defined goal that all parties

agree to.
z Full information is available about criteria.
z All the alternatives and their consequences are
known.
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Assumptions of the Rational
Decision Making Process
(continued)
z The decision preferences are clear.
z The decision preferences are constant and stable
over time.
z There are no time and cost constraints affecting
the decision.
z The decision solution will maximize the economic
payoff.
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Factors That Limit Rational
Decision Making
Organization Politics
Organization Politics
Em otions and Personal
Em otions and Personal
Preferences
Preferences
Illusion of Control
Illusion of Control
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Nonrational Decision
Making Models
Satisficing Model

z Bounded rationality – the ability of a manager to be
perfectly rational is limited by factors such as cognitive
capacity and time constraints
z Therefore, decision makers apply heuristics , or decision
rules, that quickly eliminate alternatives
z By using the heuristic known as satisficing, a manager
seeks out the first decision alternative that appears to be
satisfactory
z Satisficing is an accurate model many management
decisions.
Nonrational Decision
Making Models
(continued)
Garbage Can Model
z This model suggests that managers have a set of
preestablished solutions to problems located in
“garbage cans.”
z The garbage can model is likely to be used when
decision makers are undisciplined and have no clear
immediate goals.
z The decision making process lacks structure
z This can lead to serious difficulties
Advantages and Disadvantages of
Group Decision Making
Advantages
z Increased acceptance
z Greater pool of
knowledge
z Different perspectives
z Greater comprehension

z Training ground
Disadvantages
z Social pressure
z Minority domination
z Logrolling
z Goal displacement
z “Groupthink”
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Managing Group Decision Making
Leadership Style
Leadership Style
Devil
Devil
’
’
s Advocate Role
s Advocate Role
Stimulating Creativity
Stimulating Creativity
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Leader Decision Making Styles
z Decide and persuade
z Discover facts and decide
z Consult and decide
z Consult with group and decide
z Group decision
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Decision Making Techniques to
Stimulate Group Creativity
Brainstorm ing

Brainstorm ing
Storyboarding
Storyboarding
Nominal G roup
Nominal G roup
Technique
Technique
(N G T )
(N G T )
Delphi
Delphi
Technique
Technique
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Skills for decision making process
z Time management skills
¾ To make good decisions, managers
need time to understand the problem
and develop creative solutions.
z Delegation skills
¾ Managers who know how to delegate
are able to accomplish more than
those who feel the need to be involved
in every decision, no matter how trivial.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.