Business: Decision Making

Business: Decision Making

The Process of Decision Making

• Decision making is a critical part of managing a business.
• It involves defining the problem, identifying alternatives, evaluating the alternatives based on a set of criteria, selecting the best alternative, and implementing and monitoring the decision.
• Effective decision making can lead to improved business performance, while poor decision making can lead to business failure.

Types of Decision Making

• Businesses use different types of decision making including strategic decisions, tactical decisions, and operational decisions.
• Strategic decisions are long-term and impact the whole business. Examples could include entering a new market or launching a new product.
• Tactical decisions are medium-term and often departmental. Examples could be selecting a new supplier or implementing a new sales strategy.
• Operational decisions are short-term and involve day-to-day business operations like scheduling work or ordering supplies.

Factors Affecting Decision Making

• Multiple factors can influence business decision making such as financial constraints, time pressures, market conditions, staffing levels, and legal considerations.
• Financial constraints may limit the options a business can consider. For example, budget limitations may obstruct plans for expansion.
• Time pressures can affect the quality of decisions. Rushed decisions may result in mistakes or poor choices.
• Market conditions, including the behaviour of competitors and changes in consumer preferences, should be taken into account when making decisions.
• Staffing levels can affect the ability to implement decisions. Insufficient staff or lack of necessary skills could hinder implementation.
• Legal considerations are also crucial. Businesses must ensure their decisions do not breach any laws or regulations.

Using Information in Decision Making

• Businesses use various types of information to aid decision making, including quantitative data, qualitative data, internal information, and external information.
• Quantitative data, such as sales figures or financial reports, provides measurable and numeric data.
• Qualitative data, like customer reviews or staff feedback, offers subjective and descriptive data.
• Internal information, such as staffing levels or production capacity, is sourced from inside the business.
• External information, like market research or economic forecasts, gives insight into the wider business environment.

Risk and Uncertainty in Decision Making

• Decision making always involves some level of risk and uncertainty.
• Risk refers to the potential for an adverse outcome. It should be assessed and managed as part of the decision-making process.
• Uncertainty arises when there is limited information, making it difficult to predict outcomes. Businesses must decide how to proceed in these conditions.

Understanding these aspects is key. Businesses need to make informed decisions to drive the organisation towards its goals and ensure survival in a competitive environment.