3.4 How do businesses operate 1

Unit 4.3

What Aids Decision Making?

By the end of the lesson, you will understand

• How information helps decision making

• That there are different types of information

• How to give examples of information helping in decision making

• What is a simple decision making model

• What are the stages in a complex decision making model

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How Information helps Decision Making

• How will Helen decide whether to open on Sundays?

• How will Asda decide whether to open a new store in Tobermory?

Information used to decisions like the above must be ACCURATE and UP-TO-DATE.

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Information helps decision-making

Information can be accessed from a variety of sources:

• Internal computer files• www• Newspapers/Books• Letters• CD-ROM• People• TV

Different Types of Information

• There are 4 main types of information that you must be aware of:PrimarySecondaryInternalExternal

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Primary Information• This is information gathered by the organisation for a specific purpose.

For example, getting feedback from staff or customers by using a survey

• observing• interviewing• questionnaires• surveys

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Secondary Information• This is information gathered from published sources

outside the organisation. It may not be used for the purpose for which it was gathered. For example, Asda may look at published population figures to decide whether to locate a new store in a particular area

• Firm’s own reports

• Government statistics• Libraries• Internet

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Internal Information• Gathered from within the organisation. For example

the company sales figures for the last 3 years• final accounts• sales statistics• staff turnover• training costs

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External Information• Gathered from outwith the organisation. For

example newspaper articles.• population census information• competitors’ company reports• buying habits of 14-18 yr olds• new employment regulations

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Quick Quiz

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Primary orSecondary?

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Internal orExternal

Simple Decision Making Model

Define the problem

Implement the solution

Measure results

Select the best

solutionAssess

differentoutcomes

Develop alternative solutions

Collect relevant

information

Start

Complex Decision Making Model

(POCGADSCIE)• Identify the Problem• Identify the Objectives of the solution (what is the outcome to

be)• Identify the Constraints (what problems may be encountered)• Gather information• Analyse information• Devise possible solutions• Select the best possible solution• Communicate the decision• Plan and Implement the solution (put the solution into practice)• Evaluate the effectiveness of the solution (how successful was

it)

Qualities of Good InformationFeature Description Explanation

Timely Information should be available when required

Eg Business final accounts must be prepared in time for shareholders meeting

Accurate Information should be correct

Eg accurate market research (field) required to make decisions on new products

Relevant Information should relate to the decision being made

Eg Prices of similar products may be used to help pricing decisions

Complete All the information should be available to allow decision to be made

Eg Information on all systems on the market should be available when deciding which new computers to buy

Up-to-date

Most recent information should be used

Eg using up-to-date ferry timetables when planning business trip

Cost Effective

Information should not cost too much to gather

Field research may be expensive. Desk research cheaper.