what are the 3 types of decision making a business can do
- stategic-> long term/ affects direction business takes- made by owners/senior management
- tactical-> short to medium term carried out by middle management- flexible
- operational-> day to day decisins made in a business- short term- little risk
what is sceintific and intuitive decision making
scientific: involves the use of facts and data in a systematic way in order to arrive at a logical and evidece based decision
intuitive: uses experince and initition (gut feeling)
(+)/(-) of scientific decision making
(+) can reviw/ chnage the plan to see where it went wrong, reliable
(-) ridig , reduces creativity , expensive and time consuming
(+)/(-) of intuitive decision making
(+) if experimces very effective, helps the business go in the direction you want it to go(controll)
(-) trends change , risky
what do decision trees do
- they help a business make a decsion when there are several options to choose from
- builds up the probibility of sucsess and faliure into the decsison-making process
benifits of using decsion making trees
- lay out the problem so al options can be concidered
- allows managers to anayslise consequnces/risks of a decision
- can see the valye of outcomes and the probilbilites of achieving them
imitations of using decision making trees
- use probabilties which only give an estimate, may be inaccurate
- tie consuming to construct and may be interpreted with bias
- can oversimplify a decsision and focus too much in the financial outcome
construct decision tree model
- see conponent 2 exam q workbook for method on p22
- using that method complete tree diagram on p70
- mark it :)
- praciceeee
what is the critical path analysis
- enables large business to plan the activities involved in completing projects, so the overall project is completed in the most time effective manner possible
benifits of critical path analysis
- allows effective management of reources- allocating eg.labor where is needed
- probelms can be highlighted easily- so whole porject isn’t delyed
- improves management- managers understand what needs to be done and when it needs to be done by (competitive advantage)
limitations of critical path analysis
- informaation disorted/ overopermistic of activity times
- lack of experience of those preparing CPA- inaccurate
- external factors infulence total times taken
- time consuming- CPA does not ensure quality- focus is on time and meeting deadlines
construting CPA
- watch video duggal sent on teams
- complete a CPA alongside method
- mark and repeattt
- ask help where needed :))
what is cost benefit analysis
- method fot mesuring, in finanial terms, the cists and benifits of investment projects which includes the concerderation of the external costs and benifits of society as well as the costs and benifits to the busineess
- will need to concider:
- private costs and benifits
- public costs and benifits
example of a cost benifit analysis (aldi)
private costs-> -employee wages/ salaries
-recruitment/training
- marketing of a new store opening
- financial investment
public costs-> - increased noice/ traffic
- loss of landscape/ land
- loss of indepenendant business
private benifit-> - increased revenue and market share and profit
- econmies of scale
- increased prodcutivity
public benefit-> - more choice
- lower price (increased competition)
- jobs in store
- increased taxes paid by the business
cost/benefit anysis definitions
private costs-> cost that the business making the investment has to accept eg. recruitment costs, equipment , marketing
public costs-> cists externa to the business making the investment eg. traffic congestion , noise
private benefits-> benefits the busines gains as a result of investment
public benifits-> beneifts external to the business that result fro. making the investment eg.jobs
beneifts of cost benefit analysis
- impacts on society and communities are taken into account
- ## puts value on external benifitsand costs that would normalaly be ignored by private sector businses
limitations of cost benefit analysis
- subjective eg.traffic may be a prblem to some and not for all
- if social costs and benefits are incorrectly calculated then wrong choice will be made
- wil stakeholders be calculated in the calculation of public costs and benefits
role of imfomation technology on decision making
- can be used to make day-to-day decisions eg.when to order stock/staffing systems
- using an EPOS system (electronic point of sale)- takes in forcast sales and weather data- to detemin levels of prodcution, rota staff shifts, delivery arrangements
- using MIS system (management information system)- collects/processes data- better decisions
- smart IT methods- decision tree models, CPA carried out by computer models- faster/ accuarate
- expert systems/ai- imiates human thinking-conciders reasoning to. give eevidnece based on conclusions
