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Module 2 Contd


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Module 2 Contd

  1. 1. DECISION MAKING <ul><li>A step in planning </li></ul><ul><li>An act of concluding after due consideration </li></ul><ul><li>The selection of a course of action from among alternatives </li></ul><ul><li>What? When? Where? …….How? </li></ul>
  2. 2. STEPS IN DECISION MAKING <ul><li>Premising (the line of reasoning or logic or the basis of argument) </li></ul><ul><li>Identifying Alternatives </li></ul><ul><li>Evaluating alternatives in terms of the goal sought </li></ul><ul><li>Choosing an alternative, i.e., making a decision </li></ul>
  3. 3. Rationality in decision making <ul><li>Rationale – Ground, logical basis, vindicating reason. </li></ul><ul><li>Future as a hope </li></ul><ul><li>Future as a bundle of uncertainties </li></ul><ul><li>Future as a challenge </li></ul><ul><li>Use of information technology </li></ul><ul><li>Use of analytical and statistical tools </li></ul><ul><li>LIMITED OR BOUNDED RATIONALITY – Limitations of time, information, money or other resources, size and nature of risk. </li></ul>
  4. 4. DEVELOPMENT OF ALTERNATIVES <ul><li>There is never only one way of doing a thing </li></ul><ul><li>Contribution of Research and common sense towards developing alternatives </li></ul><ul><li>LIMITING FACTOR – is the one that stands in the way of accomplishing the desired objective </li></ul>
  5. 5. EVALUATION OF ALTERNATIVES <ul><li>Quantitative factors – fixed costs, variable costs, advertisement budget, material cost, resource nos. </li></ul><ul><li>Qualitative factors – Quality of customer care, labor relations, risk of technological change,…. </li></ul><ul><li>MARGINAL ANALYSIS – Comparing additional revenues with additional costs to be incurred. </li></ul><ul><li>COST EFFECTIVE ANALYSIS – Ratio of benefits to costs, Getting greatest value for a given expenditure. </li></ul>
  6. 6. APPROACHES TO SELECTING AN ALTERNATIVE <ul><li>Experience </li></ul>selecting an alternative Experiment Research & Analysis
  7. 7. APPROACHES TO SELECTING AN ALTERNATIVE <ul><li>Experience – what? Why is it valued high? What is the significance of experience? How relevant is your past experience to your today’s problems? Do you have a master key for all locks? Why should you analyze previous successes and failures? </li></ul><ul><li>Experimentation – Most expensive technique with high outlay on capital and human resource. </li></ul><ul><li>FUTURE AND PRESENT NEED NOT BE DUPLICATES OF PAST. </li></ul><ul><li>NOTHING IS PERMANENT EXCEPT CHANGE. </li></ul>
  8. 8. APPROACHES TO SELECTING AN ALTERNATIVE <ul><li>Research and Analysis – Computer and print out approach or Pencil and paper approach involving study of many quantitative and qualitative parameters. Role of Simulation. Architects of today using computers. Defense products, Aircraft industry,…. </li></ul>
  9. 9. TYPES OF DECISIONS <ul><li>Programmed and Non-programmed decisions – examples </li></ul><ul><li>Decisions under certainty and uncertainty (& Risk) </li></ul>
  10. 10. Programmed decisions: <ul><li>Programmed decisions are used for structured or routine work, lathe operators,for instance have specifications and rules that tell them whether the part they made is acceptable, has to be discarded, or should be reworked. Another the recording of standard inventory items. This kind of decision is used for routine and repetitive work; it relies primarily on previously established criteria. </li></ul>
  11. 11. Non programmed decisions <ul><li>Non programmed decisions are used for unstructured, novel and ill defined situations of a nonrecurring nature. </li></ul><ul><li>E.g . Introduction of the Macintosh Computer by Apple Computer or the development of the four-wheel drive passenger car by Audi. Strategic decisions in general are non programmed decisions, since they require subjective judgments. </li></ul>
  12. 12. CREATIVITY AND DECISION MAKING <ul><li>Creativity – Ability and power to develop new ideas </li></ul><ul><li>Innovation - using new ideas. </li></ul>
  13. 13. THE CREATIVE PROCESS <ul><li>Unconscious scanning </li></ul><ul><li>Intuition </li></ul><ul><li>Insight </li></ul><ul><li>Logical formulation </li></ul><ul><li>BRAINSTORMING </li></ul><ul><li>GROUP DISCUSSIONS </li></ul>
  14. 14. DECISION TREES <ul><li>Decision Trees are excellent tools for helping you to choose between several courses of action. They provide a highly effective structure within which you can lay out options and investigate the possible outcomes of choosing those options. They also help you to form a balanced picture of the risks and rewards associated with each possible course of action. </li></ul>
  15. 15. <ul><li>The main points of the decision tree are: </li></ul><ul><li>Using the information acquired in preparing to make the decision. </li></ul><ul><li>Recognizing the sequential nature of the decision making process. </li></ul><ul><li>Decision tree is a graphic outline of the future choices that the decisions made in the present will lead to. </li></ul><ul><li>Decision tree helps managers to evaluate and arrange the information in order and </li></ul><ul><li>Decision tree enables managers to introduce a degree of quantifiability </li></ul>