1. © Prentice Hall, 2005 1 - 1

2. © Prentice Hall, 2005 1 - 2ObjectivesObjectives 1.A fundamental understanding of the term decision 2.An understanding of each element of the decision situation 3.An ability to use the decision-making process 4.An appreciation for the various situations in which decisions are made 5.An understanding of probability theory and decision trees as decision- making tools 6.Insights into groups as decision makers

3. © Prentice Hall, 2005 1 - 3 Fundamentals of Decisions Definition of a Decision Types of Decisions Programmed Nonprogrammed The Responsibility for Making Organizational Decisions Elements of the Decision Situation The Decision Makers Goals to Be Served Relevant Alternatives Ordering of Alternatives Choice of Alternatives

4. © Prentice Hall, 2005 1 - 4 Fundamentals of Decisions

5. © Prentice Hall, 2005 1 - 5 Fundamentals of Decisions

6. © Prentice Hall, 2005 1 - 6 Fundamentals of Decisions

7. © Prentice Hall, 2005 1 - 7 The Decision-Making Process

8. © Prentice Hall, 2005 1 - 8 The Decision-Making Process Identifying an Existing Problem Problems are brought to the attention of managers by: 1. Orders issued by managers’ supervisors 2. Situations relayed to managers by their subordinates 3. The normal activity of the managers themselves

9. © Prentice Hall, 2005 1 - 9 The Decision-Making Process Listing Alternative Solutions Limitations on the number of problem-solving alternatives available: 1. Authority factors 2. Biological or human factors 3. Physical factors 4. Technological factors 5. Economic factors

10. © Prentice Hall, 2005 1 - 10 The Decision-Making Process

11. © Prentice Hall, 2005 1 - 11 The Decision-Making Process Selecting the Most Beneficial Alternative 1)List the potential effects of each alternative 2)Assign a probability factor to each of the potential effects 3)Compare each alternative’s expected effects and the respective probabilities of those effects Implementing the Chosen Alternative Gathering Problem-Related Feedback Feedback determines implemented alternative’s effect on problem If problem is not solved, seek out and implement another alternative

12. © Prentice Hall, 2005 1 - 12 Decision-Making Conditions Complete Certainty Condition Complete Uncertainty Condition Risk Condition

13. © Prentice Hall, 2005 1 - 13 Decision-Making Tools Probability Theory Decision Trees To compare financial consequences, management must: 1. Study estimates of investment amounts necessary for: Building a large plant Building a small plant Expanding a small plant 2. Weigh the probabilities of facing different product demand levels 3. Consider projected income yields for each decision alternative

14. © Prentice Hall, 2005 1 - 14 Decision-Making Tools

15. © Prentice Hall, 2005 1 - 15 Decision-Making Tools

16. © Prentice Hall, 2005 1 - 16 Group Decision Making Advantages and Disadvantages of Using Groups to Make Decisions Processes for Making Group Decisions Brainstorming

17. © Prentice Hall, 2005 1 - 17 Group Decision Making

18. © Prentice Hall, 2005 1 - 18 Group Decision Making Processes for Making Group Decisions (continued) Nominal Group Technique Step 1—Each group member writes down individual ideas Step 2—Each member presents individual ideas orally Step 3—After members present ideas, entire group discusses ideas Step 4—When discussion completed, a secret ballot is taken

19. © Prentice Hall, 2005 1 - 19 Group Decision Making Processes for Making Group Decisions (continued) Delphi Technique Step 1—A problem is identified Step 2—Group members are asked to offer solutions to the problem Step 3—Responses of all group members are compiled and sent out Step 4—Members are asked to generate a new individual solution Evaluating Group Decision-Making Processes

20. © Prentice Hall, 2005 1 - 20 Questions