Strategic decision making

1. STRATEGIC DECISION MAKING CHANDRA SHEKHAR PANDEY

2. What is Decision Making? Decision making The act of choosing one alternative from among a set of alternatives www.managepedia.blogspot.com

3. Dimensions of Strategic Decisions Top management Decisions Are future oriented Require Large amount of resources Affect long term prosperity of the firm Usually have multifunctional consequences www.managepedia.blogspot.com

4. Characteristics of Strategic Decisions ◆ They are elusive problems that are difficult to define precisely. ◆ They require an understanding of the problem to find a viable solution. ◆ They rarely have one best solution, but often a series of possible solutions. ◆ Questions about trade-offs and priorities appear in the solutions. ◆ Solution benefits are difficult to assess as to their effectiveness, in part because they lack a clear final end point against which effectiveness can be judged. ◆ Other problems in the organization are connected to solutions for a focal problem. ◆ High levels of ambiguity and uncertainty are associated with solutions. ◆ Realizing hoped for benefits has considerable risk. ◆ Strategic decisions have competing interests that prompt key players to use political pressure to ensure that a choice aligns with their preferences. www.managepedia.blogspot.com

5. Types of Decision Making 1.Programmed decision A decision that is fairly structured or Recurs with some frequency (or both) 2.Non programmed decision A decision that is relatively unstructured and occurs much less often than a programmed decision www.managepedia.blogspot.com

6. Decision Making Conditions www.managepedia.blogspot.com Level of ambiguity and chances of making a bad decision

7. Perspectives/models of Decision Making 1. Classical or Rational Model- Managers are logical and rational and that they make decisions that are in the best interests of the organization. 2. Behavioral Model :- Managers are not always logical and they use intuition, and personal judgements in making decisions www.managepedia.blogspot.com

8. Assumptions of Rational Model 1. Decision makers have complete information about the decision situation and possible alternatives. 2. They can effectively eliminate uncertainty to achieve a decision condition of certainty. 3. They evaluate all aspects of the decision situation logically and rationally. www.managepedia.blogspot.com

9. Steps in Rational Decision Making Process Objectives to be achieved are determined. Alternative ways of achieving these objectives are identified. Each alternative is evaluated. The best alternative is chosen www.managepedia.blogspot.com

10. Behavioral Model of Decision Making Administrative Model:- Managers use incomplete and imperfect information, (2) constrained by bounded rationality, (3) tend to “satisfice” when making decisions www.managepedia.blogspot.com

11. Bounded rationality A concept suggesting that decision makers are limited by their values and unconscious reflexes, skills, and habits www.managepedia.blogspot.com

12. Satisfying The tendency to search for alternatives only until one is found that meets some minimum standard of sufficiency www.managepedia.blogspot.com

13. Because of the inherent imperfection of information, bounded rationality, and satisficing, the decisions made by a manager may or may not actually be in the best interests of the organization. A manager may choose a particular location for the new plant because it offers the lowest price and best availability of utilities and transportation. Or she may choose the location because it is located in a community where she wants to live. www.managepedia.blogspot.com

14. Intuition An innate belief about something, without conscious consideration www.managepedia.blogspot.com

15. Escalation of commitment A decision maker’s staying with a decision even when it appears to be wrong www.managepedia.blogspot.com

16. Scope of Strategic Decision Making www.managepedia.blogspot.com

17. Advance issues in Strategic Decision Making??????? To be continued………………………………………. www.managepedia.blogspot.com