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CHP 5

Marketing2

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51 views29 pages

CHP 5

Marketing2

Uploaded by

laleenmehta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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What is decision-making?

The word decision is defined as:


“A choice between two or more
alternatives”.
Thus decision-making can be defined as:
“the selection of a course of action from
among alternatives ”.
Decision-making
• Decision-making process
 A set of eight steps that includes identifying a problem,
selecting a solution, and evaluating the effectiveness of
the solution
• Problem
 A discrepancy between an existing and a desired state of
affairs
Example:
“The manager has resigned, and we need another
manager”
Here the phrase “manager has resigned” reflects the
current state while “need another manager”
represents a desired state.

Copyright © 2005 Prentice Hall, Inc. All rights reserved. 4–2


• Decision criteria
Factors that are relevant in a decision
The word criteria, is defined as “a standard
by which something can be judged”.
A decision criteria therefore, is the basis of
a decision, which outlines the relevant and
important factors for a decision. And
implicitly, it also defines what is not
important.

Copyright © 2005 Prentice Hall, Inc. All rights reserved. 4–3


Examples of Planning-Function Decisions

 What are the organization’s long-term objectives?


 What strategies will best achieve those objectives?
 What should the organization’s short-term objectives be?
 What is the most efficient means of completing tasks?
 What might the competition be considering?
 What budgets are needed to complete department
tasks?
 How difficult should individual goals be?

Exhibit 4.1
Copyright © 2005 Prentice Hall, Inc. All rights reserved. 4–4
The Decision-Making Process

Exhibit 4.2
Copyright © 2005 Prentice Hall, Inc. All rights reserved. 4–5
Criteria and Weight in Car-Buying Decision
(Scale of 1 to 10)
CRITERION WEIGHT
Price 10
Interior comfort 8
Durability 5
Repair record 5
Performance 3
Handling 1

Exhibit 4.3
Copyright © 2005 Prentice Hall, Inc. All rights reserved. 4–6
Assessment of Car Alternatives

Exhibit 4.4
Copyright © 2005 Prentice Hall, Inc. All rights reserved. 4–7
Weighting of Vehicles
(Assessment Criteria X Criteria Weight)

Exhibit 4.5
Copyright © 2005 Prentice Hall, Inc. All rights reserved. 4–8
Decision-making (cont’d)
• Decision implementation
 Putting a decision into action; includes conveying the
decision to the persons who will be affected by it and
getting their commitment to it.

Copyright © 2005 Prentice Hall, Inc. All rights reserved. 4–9


Rational Decision making:
• Rational Decision making:
 Type of decision making in which choices are
consistent, logical and maximize value within
specified constraints.
• Bounded rationality (Herbert Simon)
 Type of decision making that is rational but limited
(bounded) by an individual’s ability to process
information.
• Satisfice
 Making a “good enough” decision: choosing the first-
identified alternative that satisfactorily and sufficiently
solves the problem.
Copyright © 2005 Prentice Hall, Inc. All rights reserved. 4–10
Assumptions of Rationality

Exhibit 4.6
Copyright © 2005 Prentice Hall, Inc. All rights reserved. 4–11
Making Decisions: The Rational Model
• Certainty
 A situation in which a decision maker can make
accurate decisions because all outcome of every
possible alternative is known.
• Uncertainty
 A condition under which there is not full knowledge of
the problem and reasonable probabilities for
alternative outcomes cannot be determined.
• Risk
 The probability that a particular outcome will result
from a given decision.

Copyright © 2005 Prentice Hall, Inc. All rights reserved. 4–12


How Do Problems Differ?
• Well-structured problems
 Straightforward, familiar, easily defined problems

• Ill-structured problems
 New problems in which information is ambiguous or incomplete

• Programmed decision
 A repetitive decision that can be handled by a routine approach

• Nonprogrammed decisions
 Decisions that must be custom-made to solve unique and
nonrecurring problems

Copyright © 2005 Prentice Hall, Inc. All rights reserved. 4–13


Decision Types

Effective managers make various kinds of


decisions. In general, these decisions are
either
 Programmed decisions
 Non-programmed decisions
Programmed Decisions
 A decision that is repetitive and routine
 A definite method for its solution can be
established
 Does not have to be treated a new each
time it occurs
 Procedures are often already laid out
 Examples: pricing standard customer
orders, determining billing dates, recording
office supplies etc.
Non-programmed Decisions

 A decision that is novel (new or unique)


or Ill structured
 No established methods exist, because
it has never occurred before or because
 It is too complex
Non-programmed Decisions

Organizational Nature of Nature of


Levels
Problems Decision-making
Non-programmed Decisions
 Are “tough” decisions that involve risk
and uncertainty and
 call for entrepreneurial abilities
 Such decisions draw heavily on the
analytical abilities of the manager
 Examples: Moving into a new market,
investing in a new unproven technology,
changing strategic direction
Programmed Decision-Making Aids
• Policy
 A general guide that establishes parameters for making
decisions about recurring problems.
• Procedure
 A series of interrelated sequential steps that can be
used to respond to a well-structured problem (policy
implementation).
• Rule
 An clear statement that tells managers what they
ought or ought not to do (limits on procedural actions).

Copyright © 2005 Prentice Hall, Inc. All rights reserved. 4–19


Types of Problems, Types of Decisions,
and Level in the Organization

Exhibit 4.8
Copyright © 2005 Prentice Hall, Inc. All rights reserved. 4–20
Technology And Decision Making
• Expert systems
 Software that acts like an expert in analyzing and solving
ill-structured problems
 Use specialized knowledge about a particular problem area
rather than general knowledge
 Use qualitative reasoning rather than numerical
calculations
 Perform at a level of competence higher than that of
nonexpert humans.
• Neural networks
 Software that is designed to imitate the structure of
brain cells and connections among them

Copyright © 2005 Prentice Hall, Inc. All rights reserved. 4–21


Decision Making: Styles
• Directive style
 Characterizes the low tolerance for ambiguity and a
rational way of thinking of individuals who are logical
and efficient and typically make fast decisions that
focus on the short term.
• Analytic style
 Characterizes the high tolerance for ambiguity
combined with a rational way of thinking of
individuals who prefer to have complete information
before making a decision.

Copyright © 2005 Prentice Hall, Inc. All rights reserved. 4–22


Decision Making: Styles (cont’d)
• Conceptual style
 Individuals who tend to be very broad in outlook, to
look at many alternatives, and to focus on the long
run and often look for creative solutions.
• Behavioral style
 Individuals who think intuitively but have a low
tolerance for uncertainty; they work well with others,
are open to suggestions, and are concerned about
the individuals who work for them.

Copyright © 2005 Prentice Hall, Inc. All rights reserved. 4–23


Decision-Making Styles

Exhibit 4.9
Copyright © 2005 Prentice Hall, Inc. All rights reserved. 4–24
Group Decision Making
• Advantages • Disadvantages
 Make more accurate  Is more time-consuming
decisions and less efficient
 Provides more complete  Minority domination can
information influence decision process
 Offers a greater diversity of  Increased pressures to
experiences and conform to the group’s
perspectives mindset (groupthink)
 Generates more alternatives  Ambiguous responsibility
 Increases acceptance of a for the outcomes of
solution decisions
 Increases the legitimacy of a
decision.

Copyright © 2005 Prentice Hall, Inc. All rights reserved. 4–25


When Are Groups Most Effective?
• Creativity
 Groups tend to be more creative than individuals.
• Acceptance of the final solution
 Groups help increase the acceptance of decisions.
• Effectiveness of group decision making
 Groups of five to seven members are optimal for
decision process speed and quality.

Copyright © 2005 Prentice Hall, Inc. All rights reserved. 4–26


Improving Group Decision Making
• Brainstorming
 An idea-generating process that encourages
alternatives while withholding criticism.
• Nominal group technique
 A decision-making technique in which group members
are physically present but operate independently.
• Electronic meeting
 A type of nominal group technique in which
participants are linked by computer.

Copyright © 2005 Prentice Hall, Inc. All rights reserved. 4–27


What Is Creative Potential?
• Expertise
 Understanding, abilities, knowledge, proficiencies,
necessary in the field of creative endeavor.
• Creative-thinking skills
 The personality characteristics associated with
creativity, the ability to use analogies, as well as the
talent to see the familiar in a different light.
• Intrinsic task motivation
 The desire to work on something because it’s
interesting, involving, exciting, satisfying, or personally
challenging.

Copyright © 2005 Prentice Hall, Inc. All rights reserved. 4–28


Three Elements
of Creativity

Creativity
The ability to produce
novel and useful ideas

Source: T. M. Amabile. “Motivating Creativity in Organizations,” Califormia Management Review (Fall 1997), p. 43. Exhibit 4.7
Copyright © 1997, by The Regents of the University of California. Reprinted by permission of the Regents.
Copyright © 2005 Prentice Hall, Inc. All rights reserved. 4–29

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