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Decision Making (18th Oct)
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A Global and Entrepreneurial Perspective
MANAGEMENT
PRINCIPLES OF MANAGEMENT
Sr. No.Chapter No.Chapter Heading11Management: Science, Theory and Practice (27th September 2010)24Essentials of Planning and Managing by Objectives (4th Oct)35Strategies, Policies and Planning Premises (11th Oct)46Decision Making (18th Oct)57The Nature of Organizing, Entrepreneuring, and Reengineering68Organization Structure: Departmentation79Line/ Staff Authority, Empowerment and Decentralization810Effective Organizing and Organization Culture914Human Factors and Motivation1015Leadership1116Committees, Teams and Group Decision Making1218The System and Process of ControllingSessional EvaluationExternal Evaluation1515205050Quiz per ClassAssignment & PresentationMid-termTotal SessionalExternal ExamDecision Making
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Chapter 4
TABLE OF CONTENTS
The importance and limitations of rational decision making
Development of alternatives and the limiting factor
Evaluation of alternatives
Selecting an alternative: three approaches
Programmed and Non- programmed decisions
Decision Making under certainty, uncertainty, and risk
Creativity and Innovation
DECISION MAKING
Decision making is the selection of a course of action amongst all possible alternatives
THE IMPORTANCE AND LIMITATIONS OF RATIONAL DECISION MAKING
Rationality in decision making:Deciding or acting rationally is attempt to reach some goals that cannot be attained without action.A clear understanding of alternative courses is required, by which a goal can be rached under existing circumstances and limitationsThe information and the ability to analyze and evaluate alternatives in the light of goals sought is also requiredA desire to come to the best solution by selecting the alternative that most effectively satisfies goal achievement is another requirementAchieving complete rationality is seldom:Future may always have uncertaintiesIt is difficult to recognize all the possible alternatives to reach the goal, mostly in new situationsMostly all the alternatives can not be analyzed, even after using the newest analytical techniquesTHE IMPORTANCE AND LIMITATIONS OF RATIONAL DECISION MAKING
Limited or Bounded RationalityThe polymath Herbert Simon in 1956, proposed that rationality is bounded. Because getting information is costly and decision outcomes typically unknown, instead of maximizing utilities, people only try to satisfice.Satisficing, a "handy blended word combining satisfy with suffice",is a decision-making strategy that attempts to meet criteria for adequacy, rather than to identify an optimal (best)solutionDEVELOPMENT OF ALTERNATIVES AND THE LIMITING FACTORS
After we are done with setting our goalsAnd finalizing a clear planning premisesNow it is required to develop alternativesThere are always alternatives to any course of action, that could be developed by ingenuity, research and common senseIf we dont find any alternative, then we need to work hard upon it.The principle of limiting factor:By recognizing and overcoming those factors that stand critically in the way of a goal, the best alternative course of action can be selectedEVALUATION OF ALTERNATIVES
After we have developed appropriate alternatives, we need to select them after due evaluationDecision making is involved in every step of decision making like selecting goals, in choosing critical premises etcThe alternatives must be evaluated in terms of quantitative as well as quantitative factorsQuantitative factors (intangible factors):the factors that can be measured in numerical terms such as deadlines, costs etcQualitative factors (intangible factors):the factors that are difficult to be measured numerically such as the morale of labor, the political climate, the risk of technological change etcEVALUATION OF ALTERNATIVES
Marginal Analysis:The objective is to increase the profit, and with increasing output, the additional cost is also incurred/ required.If the additional revenue of a larger quantity is greater than its additional cost, more profit can be made by producing moreHowever, if the additional revenue of the larger quantity is less than its additional cost, a larger profit can be made by producing lessCost Effectiveness AnalysisThis is also called as Cost benefit analysis.It seeks the best ratio of benefit and costSELECTING AN ALTERNATIVE: THREE APPROACHES
Experimentation
How to select from amongst alternatives?
Choice Made
Reliance on the past
Research and Analysis
SELECTING AN ALTERNATIVE: THREE APPROACHES
SELECTING AN ALTERNATIVE: THREE APPROACHES
SELECTING AN ALTERNATIVE: THREE APPROACHES
PROGRAMMED OR NON PROGRAMMED DECISIONS
DECISION MAKING UNDER CERTAINTY, UNCERTAINTY, AND RISK
Unconscious scanning
It is unconscious and requires an absorption in the problemIntuition
It connects the unconscious to the consciousIt may involve apparently contradicting factorsIt needs time to work upon, requires that people find new combinations and integrate diverse concepts and ideasIt is promoted by brain storming and other techniquesCREATIVITY AND INNOVATION
3.Insight
It is the result of the hard workThis may sometime be distracting or be a result of distractionThe insights are usually required to be noted down and then evaluated as creative ideas4.Logical formulation/ verification
This is the final stage of the creative process.Insights are tested in the light of logic or experiment or by criticism.CREATIVITY AND INNOVATION
CREATIVITY AND INNOVATION
CREATIVITY AND INNOVATION