Unit 2

Outline
• Information System and decision making
• Decision theory
• Decision making process and theory
• Use of technology in decision making
• Decision support systems
• Management reporting
Decision theory
• Analysis of decision-making process.
• Evaluate how choices are made.
• In uncertain situations and where the decision variables are
unknown
• Tools from mathematics, philosophy, statistics and psychology in
analyzing how decisions are made.
• This theory also has to do with how choices are logically made based
on probabilities and uncertain consequences.
Decision theory
• Decision theory relates with how activities leading to decision
making are understood. 
• Decision theory helps entities determine how a professional or
consumer makes rational choices while making a decision.
• When a person makes a decision, their belief system, morals, values,
social background, and even fears and uncertainty play a crucial
role. Uncertainties such as states, repercussions, and behaviors
cause people to choose one option.
Decision theory
• In launching new products and services

• Successful business, marketing strategy, and behavioral changes.

Decision theory
• The method is an important aspect of everyday living since it aids in
identifying a pattern or trend in a person’s life.
• It always answers the questions and the logic that underpins them.
• Even the smallest life decisions reveal a lot about a person.
• For example, why do people like a particular political party, their
views on marriage, their favorite color, or why they wish to visit a
location with mountains or beaches, whether they drive to work or
take the bus?
• In other words, why is a person the way they are?
Decision theory
• The individual choices are heavily influenced by circumstances,
repercussions, and behaviors that can be understood in two types:
Example #1

• Firm A has had a monopoly in the industry for more than a decade. It is
the market leader for various reasons, such as quality, pricing, brand
value, recognition and awareness, goodwill, availability, good customer
service, marketing strategy, seasonal product launches, etc. Therefore,
there was no rivalry for firm A at first.
• Company B, a new competitor, is about to enter the market. It
uses decision theory in statistics to figure out how company A became
the market leader, why customers prefer its products, what company A
offers that makes it a popular choice, and when and where company A
sells the most. It helps firm B in deciphering client demand and
behavior.
Example #2

• People are nothing more than the results of their own choices.
Companies can read, attract, influence, and control users’ minds, which
contradicts the decision-making theory. Social media and online
streaming platforms track viewers’ choices, such as pages they visit,
the content they like, dislike, share, post, etc.
• Netflix is an example of how viewers watch more than just an algorithm
to attract and become addicted. In addition, a new web series is often
released a day before the holiday or only on weekends, a specific
type of content is always present in the Instagram feed, and one
particular YouTube video suggestion is returning over and over
again.
Decision Making Styles - A Business Case:

Book Of Faces:
The CEO of the company formed a task force of 5 key
employees specializing in engineering, public relations,
privacy, and security.
The CEO explained the various alternatives to each group and,
through a round-table discussion, they eventually agreed on
their course of action as a team.
Decision Making Styles - A Business
Case:
• Tweety Bird:
Instead of thinking of alternatives himself, the CEO gathered
his executives and asked them to brainstorm any type of
response, including radical ones such as shutting down its
servers in Europe.
The best ideas were examined to understand the long-term
implications.
After the brainstorming process, the executive team as a
whole agreed on a single action plan.
Decision Making Styles - A Business
Case:
• Linked Business Network:
• The CEO saw this as an emergency that needed to be
responded to extremely quickly.
• He shut himself up in his office for a few hours of thinking
and made his decision on an approach.
• He then communicated his decision to his staff which felt
excluded and did not necessarily agree with the course of
action.
Decision Making Styles - A Business
Case:
• Chat Snapper:
• The CEO hired a research team to analyze how technology
companies have responded to previous regulatory reforms
and their stock price performance for the next 5 years.
• Every possible data point was included in the study in order
to not miss out on anything.
• Eventually, the research findings indicated the best course
of action in order to maximize long-term shareholder
wealth.
 Solution:
See below.

Decision Making Styles - A Business

Case:
Company Decision Making Style

Book Of Faces Behavioral

Tweety Bird Conceptual

Linked Business Network Directive

Chat Snapper Analytical

Decision-Making Process
Step 1 − Identification of the Purpose of the Decision

• In this step, the problem is thoroughly analyzed. There are a couple

of questions one should ask when it comes to identifying the purpose
of the decision.
• What exactly is the problem?
• Why the problem should be solved?
• Who are the affected parties of the problem?
• Does the problem have a deadline or a specific time-line?
Step 2 − Information Gathering

• A problem of an organization will have many stakeholders.

• In addition, there can be dozens of factors involved and affected by the

problem.

• In the process of solving the problem, you will have to gather as much as
information related to the factors and stakeholders involved in the problem.

• For the process of information gathering, tools such as 'Check Sheets' can be
effectively used.
Step 3 − Principles for Judging the Alternatives

• In this step, the baseline criteria for judging the alternatives should be
set up.
• When it comes to defining the criteria, organizational goals as well
as the corporate culture should be taken into consideration.
• As an example, profit is one of the main concerns in every decision
making process.
• Companies usually do not make decisions that reduce profits, unless
it is an exceptional case.
• Likewise, baseline principles should be identified related to the
problem in hand.
Step 4 − Brainstorm and Analyze the Choices

• For this step, brainstorming to list down all the ideas is the best option.
Before the idea generation step, it is vital to understand the causes of
the problem and prioritization of causes.
• For this, you can make use of Cause-and-Effect diagrams and Pareto
Chart tool. Cause-and-Effect diagram helps you to identify all possible
causes of the problem and Pareto chart helps you to prioritize and
identify the causes with the highest effect.
• Then, you can move on generating all possible solutions
(alternatives) for the problem in hand.
Step 5 − Evaluation of Alternatives

• Use your judgment principles and decision-making criteria to evaluate

each alternative.
• In this step, experience and effectiveness of the judgment principles
come into play.
• You need to compare each alternative for their positives and
negatives.
Step 6 − Select the Best Alternative

• Once you go through from Step 1 to Step 5, this step is easy.

• In addition, the selection of the best alternative is an informed

decision since you have already followed a methodology to derive and
select the best alternative.
Step 7 − Execute the decision

• Convert your decision into a plan or a sequence of activities.

• Execute your plan by yourself or with the help of subordinates.

Step 8 − Evaluate the Results

• Evaluate the outcome of your decision.

• See whether there is anything you should learn and then correct in
future decision making.
• This is one of the best practices that will improve your decision-
making skills.
Role of Technology in decision making
• Digital world

• Quick end decisions are required

• Customers requirements

• Profitability

• Competitors
Role of Technology in decision making

With technology
• Faster
• Streamlined
• Less prone to errors
Role of Technology in decision making
Establish an efficient collaboration platform
• Secure and reliable communication platform

• Organisation needs

• Private meetings

• Public meetings

• More informed decisions

Role of Technology in decision making
Use AI to analyse big data such as text classification

• Big Data
• Use AI tools
• Conventional software
• analyse your big data such as text classification of your emails, messages and
support requests, you use it for a variety of decision-making processes. 
• analyse customer data, market trends, and product usage data to make better
decisions about your future business growth
Role of Technology in decision making

Automate repetitive tasks

• Time is precious

• Automate repetitive task

• Spent time in better decision making

Role of Technology in decision making

Create a centralized repository of information

• Data is critical in decision making process

• Centralised repository data is available to all

• Better analysis

• Faster access to data

Role of Technology in decision making
Helps build a culture of transparency and trust

• Transparency and trust are two essential ingredients for a successful business.
• If there is no transparency in the decision-making process, some people will feel left out of the
decision-making process. 
• It helps you attract better employees, partners, and customers. 
• so that everyone knows what is going on. 

• With the help of technology, you share important information with your team members, clients,
and stakeholders in real time.

• You can also use a platform like Zoom for an online meeting so that everyone feels included in
the decision-making process.
Role of Technology in decision making
• Leverage on virtual reality for immersive experiences

• Decision-making becomes a lot easier when you see all the potential outcomes
of your decision.

• Virtual reality helps you visualize different scenarios and make better decisions
in a shorter amount of time. 

• examine specific problems or issues

Role of Technology in decision making

• Real-time feedback is accessed via a feedback channel on the

communication platform you use in your organization.

• You use real-time feedback to make better decisions based on what

your stakeholders and customers really want or need.
 Role of Technology in decision making

• Streamline and automate your business processes

Examine your current business processes and identify the potential

bottlenecks and inefficiencies.

Streamlining your business processes helps you make better decisions

by eliminating the potential roadblocks.
Role of Technology in decision making
• Enable remote collaboration with real-time co-working tools

• better decisions with a broader perspective. 

• They help you share content, communicate, and collaborate with your
team members in real-time.
Role of Technology in decision making
• Helping in Cost Management

Not only money but time and efforts to increase profitability

Businesses that run on a constant schedule will have to pay for

human resources and office space costs, as well as
transportation costs. 
Role of Technology in decision making
• Software Management Tools 
• SaaS management can be an essential tool for any company.
• It is important to use these services correctly and avoid
unnecessary costs with their help, as they will alert you if
there are problems like missed payments or renewals that
need attention before it becomes too late
Decision support system
• Decision support systems (DSS) are interactive software-based
systems intended to help managers in decision-making by accessing
large volumes of information generated from various related
information systems involved in organizational business processes, such
as office automation system, transaction processing system, etc.
• DSS uses the summary information, exceptions, patterns, and trends
using the analytical models. A decision support system helps in
decision-making but does not necessarily give a decision itself. The
decision makers compile useful information from raw data, documents,
personal knowledge, and/or business models to identify and solve
problems and make decisions.
Decision support system
• Programmed Decisions
• There are two types of decisions - programmed and non-programmed
decisions.
• Programmed decisions are basically automated processes, general
routine work, where −
• These decisions have been taken several times.
• These decisions follow some guidelines or rules.
• For example, selecting a reorder level for inventories, is a
programmed decision.
Decision support system
• Non-programmed decisions occur in unusual and non-addressed
situations, so −
• It would be a new decision.
• There will not be any rules to follow.
• These decisions are made based on the available information.
• These decisions are based on the manger's discretion, instinct,
perception and judgment.
Decision support system
• Characteristics of a DSS
• Support for decision-makers in semi-structured and unstructured problems.
• Support for managers at various managerial levels, ranging from top executive to line
managers.
• Support for individuals and groups. Less structured problems often requires the
involvement of several individuals from different departments and organization level.
• Support for interdependent or sequential decisions.
• Support for intelligence, design, choice, and implementation.
• Support for variety of decision processes and styles.
• DSSs are adaptive over time.
Decision support system
• Benefits of DSS
• Improves efficiency and speed of decision-making activities.
• Increases the control, competitiveness and capability of futuristic
decision-making of the organization.
• Facilitates interpersonal communication.
• Encourages learning or training.
• Since it is mostly used in non-programmed decisions, it reveals new
approaches and sets up new evidences for an unusual decision.
• Helps automate managerial processes.
Decision support system
• Components of a DSS
• Following are the components of the Decision Support System −
• Database Management System (DBMS) − To solve a problem the
necessary data may come from internal or external database. In an
organization, internal data are generated by a system such as MIS.
External data come from a variety of sources such as newspapers,
online data services, databases (financial, marketing, human
resources).
Decision support system
• Model Management System − It stores and accesses models that
managers use to make decisions. Such models are used for designing
manufacturing facility, analyzing the financial health of an
organization, forecasting demand of a product or service, etc.
• Support Tools − Support tools like online help; pulls down menus,
user interfaces, graphical analysis, error correction mechanism,
facilitates the user interactions with the system.
Decision support system
• Classification of DSS
• There are several ways to classify DSS. Hoi Apple and Whinstone classifies DSS
as follows −
• Text Oriented DSS − It contains textually represented information that could have
a bearing on decision. It allows documents to be electronically created, revised and
viewed as needed.
• Database Oriented DSS − Database plays a major role here; it contains organized
and highly structured data.
• Spreadsheet Oriented DSS − It contains information in spread sheets that allows
create, view, modify procedural knowledge and also instructs the system to execute
self-contained instructions. The most popular tool is Excel and Lotus 1-2-3.
Decision support system
• Solver Oriented DSS − It is based on a solver, which is an algorithm
or procedure written for performing certain calculations and particular
program type.
• Rules Oriented DSS − It follows certain procedures adopted as rules.
• Rules Oriented DSS − Procedures are adopted in rules oriented DSS.
Export system is the example.
• Compound DSS − It is built by using two or more of the five
structures explained above.
Decision support system
• Types of DSS
• Following are some typical DSSs −
• Status Inquiry System − It helps in taking operational, management
level, or middle level management decisions, for example daily
schedules of jobs to machines or machines to operators.
• Data Analysis System − It needs comparative analysis and makes use
of formula or an algorithm, for example cash flow analysis, inventory
analysis etc.
Decision support system
• Information Analysis System − In this system data is analyzed and
the information report is generated. For example, sales analysis,
accounts receivable systems, market analysis etc.
• Accounting System − It keeps track of accounting and finance related
information, for example, final account, accounts receivables,
accounts payables, etc. that keep track of the major aspects of the
business.
• Model Based System − Simulation models or optimization models
used for decision-making are used infrequently and creates general
guidelines for operation or management.