Projekt Anglicky v odborných předmětech, CZ.1.07/1.3.09/04.0002 Anglicky v odborných předmětech "Support of teaching technical subjects in English“ Tutorial: Business Academy Topic: Decision-making process Prepared by: Ing. Adéla Hrabcová Projekt Anglicky v odborných předmětech, CZ.1.07/1.3.09/04.0002 je spolufinancován Evropským sociálním fondem a státním rozpočtem České republiky.

Managerial function decision-making Decision-making is one of the most important managerial activities. Incorrect decision can be (and often it is) a cause of business failure. Decision-making process = a choice between at least two alternatives – decision- making options. The aim is to select the optimal alternative that brings the highest benefit.

Elements of a decision-making process Objective – a future state that should be reached by implementing the chosen option Decision-making subject – the decision-maker – it can be an individual or a group of people Decision-making object – the subject of decision – ‚what‘ is important to decide Criteria for decision-making – perspectives that are important for suitability of various options Variant – a possible way of negotiation that should lead to the problem

Types of criteria costs – the lower is the value of criteria, the better it is (e.g. costs, losses) revenues – the higher is the value of criteria, the better it is (e.g. power, profit, lifetime, etc.)

Types of decision problems Well-structured problems – routine, recurring problems (situation), the decision is usually based on the known procedure and there is enough information concerning the problem (e.g. In a shop a customer complains about some products and the salesman knows exactly how to proceed this situation) Poorly-structured problems– new, unusual problems that have not been solved by the manager so far. Manager does not have enough information; therefore, the decision is more difficult (e.g. To decide whether to invest in a technology…)

Types of decision problems according to the level of management Levels of management Type of a problem Top management poorly structured Middle management poorly and well structured Operative management well structured

Conditions for decision making Certainty – complete information is available - we predict upcoming situation - we know the consequences of variations Risk – we can only estimate the consequence - we do not know exactly what condition occurs - we can determine the probability of variations Uncertainty – we do not know the effects of variations - we cannot predict the consequences - we do not know the probability

General decision making process Identification of the decision problem Analysis of the decision problem Determination of criteria Variant creation Variant evaluation according to criteria Selection of the best variant Implementation of the selected variants Results monitoring

Some of the decision making methods Brainstorming – a modern method that is used when making decisions in the group. It supports creativity and brings new ideas and solutions. The aim is to get or express as many ideas and thoughts as possible. All of the ideas are written down and then the best idea is chosen. Nobody should criticize and evaluate ideas of others. Brainwriting – a written form of brainstorming

Some of the decision making methods Decision-making trees– graphical tools for decision making that enables to illustrate the process of decisions and situations. The aim is to find an optimal strategy. Examples of decision-making trees:

Questions Decide whether it is a well or a poorly structured problem: A company deals with an idea to enter the Asian market Poorly structured A company wants to make a decision whether to produce a new type of product An employee deals with an idea how much material to order Well structured A foreman wants to make a decision which worker will be assigned to a particular task

Exercise Try to determine criteria that would be crucial when making following decisions: a selection of a foreign tour a purchase of a washing machine a selection of a secondary school a purchase of a car

Bibliography VEBER, J., et al. Management: základy, moderní manažerské přístupy, výkonnost a prosperita. Praha: Management Press, 2009. ISBN 978-80-7261-200-0. VEBER, Jaromír, DĚDINA, Jiří, HRŮZOVÁ, Helena, KOŘENÁŘ, Václav, MALÝ, Milan, SRPOVÁ, Jitka. Příklady z managementu a jejich řešení. 1. vyd. Praha : Fortuna, 1998. ISBN 80-7168-576-3. SYNEK, Miloslav, and Eva Kislingerová. Podniková Ekonomika. 5., přeprac. a dopl. vyd. Praha: C.H. Beck, 2010. ISBN 978-80-7400-336-3.