Review What is SWOT? What are Porter’s Generic Strategies? What is the Miles and Snow Typology? What is the Product Life Cycle? What types of diversification strategies are there? What are there strengths/weaknesses? How does one evaluate opportunities? BCG Matrix GE Business Screen What is the Prisoners’ Dilemma?

Decision Making and Problem Solving Choosing one alternative from among a set of alternatives. Not simply multiple choice You also have to identify the choices Types of decisions Programmed Structured and re-occurs Nonprogrammed Unstructured and infrequent Examples?

Decision Making Conditions Certainty Know all alternatives Know outcome for each alternative Risk Each alternative has a probability Uncertainty Do not even know all the alternatives Examples

Classical Decision Making Theory Obtain complete and perfect information on alternatives Eliminate uncertainty – identify all alternatives Evaluate alternatives Practice Good or bad approach?

Rational Decision Making Theory Recognize and define the decision situation - Sometimes hard to see the problem Identify alternatives Evaluate alternatives Select best alternative Implement choice Evaluate results – “Post mortem” Practice Sometimes projects go on too long when should be killed People get invested in a particular approach Just because it is “rational” doesn’t mean it will produce good results. E.g. New Coke, Netflix, others?

Administrative Model Theory Describes how decisions are made, not how they should be made Characteristics Bounded Rationality Decision makers are limited by skills and incomplete information Satisficing Search until find solution meeting min. req. Does not necessarily lead to the “best” decisions Examples

Other Factors in Decision Making Practice Political forces Power of customers and suppliers McDonalds Styrofoam, animal testing, etc. Intuition As opposed to “Paralysis by Analysis” Escalation of commitment Sticking with a decision even when looks wrong “Sunk costs are sunk” Risk propensity Willingness to take and comfort with risk

Group Decision Making Practice Interactive groups (teams) Delphi groups Ask group of experts for opinion, e.g. on date Average the inputs and repeat until consensus Nominal groups Group in name only Bring experts together, get ideas, and vote Manager implications: If you ask, be prepared for all responses Do you retain the right to accept or reject?

Group Decision Making Advantages More information More alternatives Greater acceptance May get better comm. Usually better decisions Disadvantages Slower Costlier Compromises are not necessarily better decisions One person may dominate “Groupthink” where desire for consensus overwhelms getting to correct decision

Managing Group Decision Making Practice Need to be careful that you don’t abdicate your responsibility Need to be careful that you don’t empower group and then take it back Set deadlines Carefully select members Make it clear that all decisions will be subject to testing and scrutiny

Exercise Deal or No Deal You have a 50/50 chance of getting either $500,000 or $1. I offer you either those odds or $200,000 guaranteed. What do you take? You have a 50/50 chance of either losing $100 or losing $1. I offer you either those odds or a guaranteed loss of $45. What do you take? What affects your decision? Expected value Expected utility

More Mental Exercises Exercise C Have a 3K sq. ft. home when everyone else has 4K sq. ft. or Have a 2K sq. ft. home when everyone else has a 1K sq. ft. home Exercise D Get 4 weeks vacation when everyone else gets 6 weeks or Get 2 weeks vacation when everyone else gets 1 week.

Videos DVD – McDonalds – One Owner DVD – Google Ch. 5, Guess Where Google is Now