3.

Decision Making
 Decision Making

Decision making thus, is an act of projecting one’s own mind upon an opinion or a course of
action. In decision making three aspects of human behaviour are involved. In decision making three
aspects of human behaviour are involved:

1. Cognition
2. Conation
3. Affectation
 Decision Making

Decision making thus, is an act of projecting one’s own mind upon an opinion or a course of
action. In decision making three aspects of human behaviour are involved. In decision making three
aspects of human behaviour are involved:

1. Cognition – The mental action or process of acquiring knowledge and understanding through,
thought experience and the senses.

2. Conation – Desire and will to perform any action.

3. Affectation – Ones feeling towards something.

Features of Decision Making
 THINK ABOUT THIS SITUATION?
• As the marketing manager of a tech company, you're preparing to launch a new smartphone
critical for the company's revenue. A minor defect in the battery is discovered just before the
launch. Fixing it would delay the launch by three months and increase costs by 10%. However, if
you proceed with the launch as planned, there's a risk of customer dissatisfaction later.
• Decision Alternatives:
1.Delay the launch and fix the defect, ensuring quality but increasing costs and delaying
revenue.
2.Launch on time without fixing the defect, accepting potential future customer complaints or
recalls.
3.Launch on time with a promise of free battery replacement for affected customers,
balancing immediate revenue and potential future costs.
4.Launch a limited batch on time and fix the defect in the rest, targeting early adopters and
improving quality for most customers.
Factors to Consider:
• Cost and profitability
• Customer trust and reputation
• Competitor actions and market share
• Short-term vs. long-term goals
 Recommended Solution
• The most balanced option would be to launch on time and offer a free battery replacement
for affected customers. This approach allows the company to:
• Meet the launch deadline and avoid losing market share to competitors.
• Maintain customer trust by proactively addressing the defect with a future solution, showing
commitment to product quality.
• Spread out costs by handling battery replacements as needed, rather than incurring an upfront
10% cost increase.
 Features of Decision Making
• Decision making implies that there are various alternatives and the most desirable alternative is
chosen to solve the problem or to arrive at expected results. A problem situation which does not
have alternatives is not really a problem requiring solution though the problem may be quite
injurious.

• Existence of alternatives suggests that the decision maker has freedom to choose an alternative of
his liking through which his purpose is served.

• Decision making may not be completely rational but may be judgemental and emotional in which
personal preferences and values of the decision maker play a significant role.

• Decision making like any other management process, is goal-directed. It implies that the decision
maker attempts to achieve some results through decision making.
 Types of Decisions

Programmed and Non-programmed Decisions

• Programmed Decisions: Programmed decisions are routine and repetitive and are made within
the framework of organizational policies and rules. These policies and rules are set well in advance
to solve recurring problems in the organization. Example: promotion policy, leave policy, notice
period, recruitment policy, etc.

• Non – Programmed Decisions: Non – programmed decisions are taken to solve unique problems
in which various alternatives cannot be decided in advance. Example: expanding business, merger,
acquisition, etc.
Strategic and Tactical Decisions

• Strategic Decisions: The strategic decisions are based on strategy which is a major action plan of
the company. They are taken for the achievement of organisational objectives.

• Tactical Decisions: They are also known as operational decisions. They are also a programmed
decision and are derived out of strategic decision. They are related to the day to day working of
the organisation.
 Decision Making Process
1. Specific Objective ( Every decision made is to achieve a specific or certain objective)

2. Identification of Problems
• Diagnosis of the problem (Identifying)
• Analysis of the problem (Diagnosis of the problem gives the understanding of what should be
done in terms of decision making analysis takes it a step further) (Diagnosis will only show you
what is the problem analysis will show you why, how, where is it a problem)

3. Search for Alternatives

4. Evaluation of Alternatives
5. Choice of Alternative
• Experience (Present outcome based on past data)
• Experimentation (Testing)
• Research and Analysis

6. Taking Action

7. Result
 Decision Tree
Steps for construction of a decision tree

1. The first basic step in construction of a decision tree is the definition of various alternatives
available at the first stage.

2. The second step is that the decision tree requires the estimation of probabilities for various events.

3. The third step is the calculation of payoff from each alternative.

 Advantages of Decision Tree

• It makes possible for managers to see at least the major alternatives open to them and that the
subsequent decisions may depend on events of the future.

• By incorporating desired probabilities we can find out the probability of achieving the desired result.

• It brings out the alternatives or premises which are often hidden.

• It expresses all outcomes or events in quantitative terms and provides precision in decision making.
 Limitations of Decision Making

• A decision tree is comparatively complex in application.

• Sometimes there are too many alternatives.

• Making of assumptions and assigning probabilities to alternatives is a difficult task.

 PERT & CPM

• Project Evaluation and Review Technique (PERT) : PERT is appropriate technique which is used for
the projects where the time required or needed to complete different activities are not known. PERT
is majorly applied for scheduling, organization and integration of different tasks within a project. It
provides the blueprint of project and is efficient technique for project evaluation .

• Critical Path Method (CPM) : CPM is a technique which is used for the projects where the time
needed for completion of project is already known. It is majorly used for determining the
approximate time within which a project can be completed. Critical path is the longest path in
project management completion of project.
 Purpose of PERT Analysis

• PERT Analysis informs Program Managers and project personnel on the project’s tasks and the
estimated amount of time required to complete each task. By utilizing this information a Program
Manager will be able to estimate the minimum amount of time required to complete the entire
project. This helps in the creation of more realistic schedules and cost estimates.
 How to do PERT Analysis
Step 1: Determine optimistic, pessimistic, and most likely estimates

To conduct PERT Analysis, three-time estimates are obtained (optimistic, pessimistic, and most likely)
for every activity along the Critical Path.

• Optimistic Time (O): the minimum possible time required to accomplish a task, assuming everything
proceeds better than is normally expected.

• Pessimistic Time (P): the maximum possible time required to accomplish a task, assuming everything
goes wrong (excluding major catastrophes).

• Most likely Time (M): the best estimate of the time required to accomplish a task, assuming
everything proceeds as normal.
 Step 2: Calculate PERT Estimate

• After completing Step 1, use the (optimistic, pessimistic, and most likely) estimates in the formula
below to calculate the PERT estimate for the project.

• Formula: (P+4M+O)/6

• Example: (8 + 4(14)+20)/6 = 14 Weeks

 Critical Path
The longest path of scheduled activities that must be met to execute a project.