1. Unit (7) Why businesses make decisions? The decision that they make might include. - what to produces, where to locate the premises, what method of production to use, what prices should be charged what wages should be paid. - Decision is made where there are a number of choices. Business decision making

2. - Strategic decision, It can affect the profitability and survival of the business. - Tactical decision, It refers to day- to – day decisions taken by businesses, How much stock to be ordered (Running business). - Short term decision, are repeated on angular basis. - Long term decision, (more than one year), its strategic decision, such as opening new branch, contracting with new suppliers. - Decisions made by firms often involve some risk.

3. Who makes decisions ? - Owners, managers, and employees. - Major decisions such as the location of a new planet, will be made by the owners. - Less important decisions, will be made by employees. - The size of business can affect who makes decisions. - In a small firm the owner will make most of the decisions, because he is the person in the control. -In a small business, some decisions might be delegated if the owner trust the employees. - In a medium business, the owner might employ a manager to help ran the business. - In very large businesses, decisions are made by different levels, and different people.

4. Type of decisions : Decisions are classified into three types : ( 1 ) Policy decisions : - It refers to the decisions a bout the general direction and overall policy of the business. - They might be the decision to buy another company the closure of a plant making loss, whether or not to launch a new product. - The board of directors are responsible for making these decisions. - In a small business, decisions are made by the owners.

5. (2) management decisions : - management decisions or executive decisions, determine how policy decisions are carried out. - Management decisions should ensure that the policy decisions are carried out as efficiently as possible according the general objectives of the company. - Some management decisions might be taken by directors since some directors are also managers in the business.

6. ( 3 ) Administrative decisions : - Administrators are office staff or supervisors. - They act according to the general policy of the company, and under the direction of management. - They have responsibility for a number of tasks. - The amount of time allocated to specific tasks and the choice of equipment. - It is argued that, the performance of employees can be improved by sharing them in decision making.

7. The decision making process : A business makes decision in order to achieve objectives the stage of decision making process. ( 1 ) Identifying objectives. - The objectives of a business might be to halt a rapid decline in sales. - The objective should be clear logic, and achievable. - The objectives might be identified by different level of management.

8. (2 ) Gathering information and ideas : - People need information and ideas to make decisions. - The amount and nature of information needed, depends on the decision. - It could take several months to collect the information. - Some decisions might be made from information, which the business already has. - The business might set up a working party to collect information and ideas. - Individuals and departments might submit ideas and information. - Another way of obtaining information and ideas to hold discussions amongst staff in the firm.

9. ( 3 ) Evaluation of ideas : - Analyzing these ideas on alternative courses of action. - One popular method of analysis is SOWT analyst's. - Decision makers could list the strengths, weaknesses opportunities, and threats of each alternative, and then make a comparison.

10. ( 4 ) Making a decision : - Decision has to be made. - This is the most important stage in the process. - Decision makers have to commit themselves to one course of action. - It is difficult to change the decision, so getting it right it is vital. - Some decisions can be reversed. - Some times the decision makers feel that they can not reach a decision, they may have to obtain more information and complete the previous two stages in the process a gain.

11. ( 5 ) Communication : - People making the decision, are not those who carry it out. - Instructions may be passed by decision makers to some one else, explaining what action should be taken. - In smaller firms, decision makers are carrying out their own decisions. - Decisions should be communicated to the people who will implement the decision.

12. ( 6 ) Outcome : - Once the decision has been carried out, it will take time before the results are known. ( 7 ) Evaluating : - Decision makers need to evaluate the outcome of their decisions. - This is presented as a report. It might be necessary to modify the course of action on the basis of the report.

13. Constraints on decision making : - Businesses can not make decisions with complete freedom. - In many situations there are factors, which hinder, limit or restrict particular courses of action. - Many constraints may make the decision easier, because they eliminate some courses of action. - Constraints can be divided into internal and external.

14. The internal constraints : Internal constraints may result from the policy of the business itself. ( 1 ) availability, decision makers are prevented from choosing certain decisions due to the lack of finance. ( 2 ) Existing company policy : - The firm may not able to reach a production target, because the overtime policy does not allow workers to work overtime. ( 3 ) People's behavior : - Decisions may be limited by people's ability. - People are also limited by their attitudes.

15. External constraints : It refers to limits from outside and are usually beyond the control of the business. ( 1 ) Government and EC legislation : - Businesses must operate within the law. The law restricts the amount of time, a person can drive a commercial vehicle to about to hours per day. ( 2 ) Competitors : - Because competition has become greater in recent years, this constraint has affected more firms. ( 3 ) lack of technology : - Firms with high technology can achieve complex tasks within short period. ( 4 ) The economic environment : - The business activity moves through booms and slumps. - This can affect investment decisions.

16. The quality of decisions : The quality of decisions depends on a number of factors : ( 1 ) Training : If people are trained well, they will be better. ( 2 ) quantity and quality of information : - Decision making will be improved, if there is a access to information. - Information technology has helped decision makers a great deal. - They are able to store more information, retrieve it, and change it into a form which is more useful to them.

17. ( 3 ) Inadequate and in accurate information can lead the wrong decision being made and may cause serious problems. ( 4 ) Ability to use decision making techniques. - The ability to use decision making techniques, will help firms to make accurate decisions. ( 5 ) Risk : - Some decisions involve considerable risk, such as the launching of a new product. - Managers prefer to choose courses of actions, which carry the lowest risk, and avoiding taking riskier coursed of action which might result in higher profits.

18. ( 6 ) Human element : - More experienced decision makers, will often, but not always make more accurate decision. - The attitude to risk might be different. - People have different capabilities. - Self-interest may affect the course of action chosen. - People often have different perceptions.

19. Interdependence : - Businesses are highly interdependent. - Many businesses depend on others. - Other businesses supply ancillary services. - When making decisions firms should considers, how they affect these support services. - Decision makers need to be a ware of the interdependent between their own company and their competitors. - In highly competitive industries, one firm's decisions can affect the behavior of other firms. - This type of interdependence is particularly important in decisions concerning.

20. ( 1 ) Price. ( 2 ) Launching new products. ( 3 ) Packaging. ( 4 ) Non-price competition. ( 5 ) Introducing new technology. ( 6 ) Exploiting new markets.