4
Chapter
Foundations
of Decision
Making
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Learning Outcomes
• Describe the decision-making process.
• Explain the three approaches managers can use
to make decisions.
• Describe the types of decisions and decisionmaking conditions managers face.
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Learning Outcomes (cont.)
• Discuss group decision-making.
• Discuss contemporary issues in managerial
decision making.
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4.1 Describe the
decision-making
process.
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How Do Managers Make Decisions?
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Identifying a Decision Problem
Problem:
a discrepancy between an existing and a desired
state of affairs.
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Identifying Decision Criteria
Relevant Factors:
• Price
• Model
• Size
• Manufacturer
• Options
• Repair record
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Weighting Criteria
1.
2.
Most important
criterion assigned a
weight of 10.
Other weights
assigned against
this standard.
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Developing Alternatives
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Analyzing Alternatives
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Selecting the Best Alternative
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Implementing the Decision
Decision implementation:
putting a decision into action.
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Evaluating the Decision
Appraising the outcome of the decision:
Was the problem resolved?
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Common Errors
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4.2 Explain the three
approaches
managers can use to
make decisions.
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Three Approaches Used to Make
Decisions: Types of Decisions
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Rational Model
Rational decision making:
choices that are consistent and value-maximizing
within specified constraints.
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Bounded Rationality
Satisfice
Escalation of
commitment
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Intuitive Decision Making
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4.3 Describe the types
of decisions and
decision-making
conditions that
managers face.
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Types of Problems
1.
2.
Structured problem
Unstructured problem
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Types of Decisions
Programmed:
Repetitive decisions that can be handled
using a routine approach.
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Types of Decisions (cont.)
Nonprogrammed:
Repetitive decisions that can be handled
using a routine approach
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Problems, Decision Types, and
Organizational Levels
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Decision-Making Conditions
• Certainty
• Risk
• Uncertainty
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