decision making models

Question 1

what are the three major types of decisions and what do they depend on

Answer 1

strategic
tactical
operational
they depend on the level of authority within a business

Question 2

operational decisions (junior management)

Answer 2

day to day decisions, simple routine

Question 3

tactical decision (middle management)

Answer 3

how to achieve policy, medium term, less complex

Question 4

strategic decisions (senior management

Answer 4

policy decisions, long term, complex and non routine

Question 5

what is the importance of decision making

Answer 5

set corporate objectives
determine corporate strategy
manage resources including staff
control day to day operations
respond to external changes
assess alternative course of actions

Question 6

can decision making be scientific

Answer 6

yes, it can be based on data
all decisions have an opportunity cost
they carry risk and reward

Question 7

name 2 advantages of scientific decision making

Answer 7

supported by quantifiable evidence
encourages logical thought process

Question 8

name 2 disadvantages of scientific decision making

Answer 8

may require expensive data
time consuming

Question 9

name 2 advantages of intuition decision making

Answer 9

allows for quick decision making
encourages innovation and creativity

Question 10

name 2 disadvantages of intuition decision making

Answer 10

difficult to justify
reliant on experience and expertise

Question 11

what is the logical series of steps for scientific decision making

Answer 11

1- set objectives
2- gather data
3- analyse data
4- making decisions
5- implement decisions
6- review decision

Question 12

what is a decision tree

Answer 12

a simple and visual way of presenting the alternative course of action available when making a decision
a mathematical model based on logic and probability

Question 13

what do decision trees identify

Answer 13

when a decision needs to be made by
choices available
costs associated with each option
the likelihood of each outcome occurring
the estimated financial result of each outcome

Question 14

what is a decision node (decision trees)

Answer 14

used where a decision has to be made
it’s a box/ square

Question 15

what is a chance node (decision trees)

Answer 15

used when there are a number of possible outcomes, a calculation is carried out here to calculate the expected value

Question 16

how do decision trees work

Answer 16

they use estimates and probabilities to calculate likely outcomes
calculating these estimates helps to decide if the net gain from a decision is worthwhile

Question 17

what is the expected value (decision trees)

Answer 17

the financial value of an outcome calculated by multiplying the financial result by its probability

Question 18

what is the net gain (decision trees)

Answer 18

the value to be gained from taking a decision
calculated by adding the expected value of each outcome and deducting the costs associated with the decision

Question 19

what is critical path analysis

Answer 19

it’s a technique used to identify the order in which all activities need to be completed when planning a complex task
they are diagrams used to organise the activities in an order to show which activities can be done simultaneously and which are dependent on earlier tasks being done

Question 20

how many nodes is critical path analysis made up of and what are they

Answer 20

3
the node number- based on the order it’s drawn
the earliest start time (EST)- the earliest the following activity can possible start
the latest finish time (LFT)- the latest an activity can finish without delaying the whole project

Question 21

what is meant by float (CPA)

Answer 21

it means that activity can be delayed without making the project longer
so it’s important to work out which activities are critical and which are float

Question 22

how to work out EST and LFT

Answer 22

1- EST, calculate first and always work from left to right
2- EST, where 2 or more activities meet, EST is always the highest calculated figure
3- LFT, calculate after EST and always work from right to left
4- LFT, where 2 or more activities meet, LFT is always the lowest calculated figure

Question 23

what’s a disadvantage of critical path analysis

Answer 23

it doesn’t take into account any external factors e.g weather or supplier changes which could cause delays

Question 24

what’s a disadvantage of critical path analysis

Answer 24

Time-consuming and complex to create
For large projects, CPA diagrams can be difficult and expensive to produce and interpret.
• Assumes accurate time estimates
If task durations are unrealistic, the whole plan becomes unreliable.
• Does not account for unexpected events
Delays like staff illness, supply shortages, or weather disruptions are not built into the model.
• Over-focus on timing, not quality
Managers may rush tasks to meet deadlines, potentially reducing quality.
• Needs regular updating
Any change in activities requires the CPA to be redrawn, which can be inefficient.

Question 25

advantages of critical path analysis

Answer 25

Identifies the minimum project time Shows the shortest possible time needed to complete a project, helping businesses plan deadlines accurately. • Highlights critical activities Managers can see which tasks cannot be delayed without affecting the whole project, so resources can be prioritised effectively. • Improves coordination and planning Helps different departments understand task sequences, improving organisation and reducing confusion. • Allows use of float time Non-critical activities have spare time (float), giving managers flexibility to reallocate labour or machinery if needed. • Helps reduce costs Better scheduling can avoid unnecessary overtime and wasted resources.

Question 26

what is cost benefit analysis

Answer 26

it’s a technique used by firms to see whether the benefits of a project out weigh costs often used for large scale projects in public sector

Question 27

how can cost benefit analysis be categorised

Answer 27

infernal- private costs and benefits external- external costs and benefits

Question 28

what is a private cost (cba)

Answer 28

costs that the business making the investment has to accept e.g marketing and training

Question 29

what are private benefits (cba)

Answer 29

benefits that the business gains from as a result of an investment e.g increased sales or increased productivity

Question 30

what are public costs (cba)

Answer 30

costs external to the business making the investment e.g impact on environment

Question 31

what are public benefits (cba)

Answer 31

benefits external to an business as a result of investment e.g jobs

Question 32

principles of CBA

Answer 32

all costs and benefits must have monetary values which are often difficult to identify probability theory is used to assess the various risks of a project

Question 33

benefits of cost benefit analysis

Answer 33

putting a monetary value on a project that is easy to understand providing info regarding a variety of markets that can be used to support/ oppose a project taking into account the needs of society rather than just private cost of a firm allows for the assessment of externalities that might be created

Question 34

principles of CBA

Answer 34

all costs and benefits must have monetary values which are often difficult to identify probability theory is used to assess the various risks of a project

Question 35

drawbacks of CBA

Answer 35

expensive to undertake the analysis the monetary values for external costs and benefits are estimates and will become less accurate in the future values assigned to non monetary considerations are likely to be subjective and based on the views of those producing the analysis

Question 36

explain the key role played by information technology in business decision making

Answer 36

Information technology helps business decision making by providing fast, accurate and up-to-date data. It allows managers to collect, store and analyse large amounts of information, identify trends, forecast outcomes and communicate quickly across the business, leading to better and faster decisions.