Unit 3 Decision Making in Business

The nature of decisions A decision is a choice between alternatives that individuals must make to get from where they are to where they want to be. In the world of business managers are faced with have to make many different decisions – some of which are vitally important to the success of that business. Managers should become experienced in making decisions and so therefore more often make the right decision. These decisions help the organisation to meet its aims and objects – help the organisation move to where they want to be.

Examples of issues decisions may have to be about What to produce Where to locate premises What method of production to use How many people to employ What price to charge for the product And many more All decisions made must be made to ensure that whatever the aims and objectives are the decision helps them meet the objectives.

Types of decision. 3 main types of business decision Strategic Decisions Tactical Decisions Operational Decisions These decisions are hierarchical

Strategic Decisions These are the “big” decisions of the organisation and set out the aims of the organisation. These tend to be long term decisions and are worked towards over 4 or 5 years. They are made by senior managers and the Board of Directors They affect the whole organisation Examples – expanding into Europe, increase output by 30% over the next 5 years

Tactical Decisions These are made to set out the objectives of the organisation and help in achieving the aims of the organisation. These decisions affect the medium to short-term running of the organisation These decisions can be made by senior or middle managers. These decisions are constantly under review to ensure that they are helping the organisation achieve its aims. Examples to increase new orders to the value of £100,000 over the next 12 months.

Operational Decisions These are the day-to-day decisions made within an organisation. They work to help achieve the objectives of the organisation They may be made by senior managers, middle managers, supervisors or in a workers’ daily duties. Often made in response to changes in circumstances Examples – a member of staff is off ill – move someone to do their job if needed, open another till in a supermarket if there are long queues

Structured Decision Making Models These are processes adopted by organisations to assist managers to make decisions – to make the right decisions. They allow managers to follow through the same process each time a decision is being made and so not miss anything out. Allows managers to become experienced in decision making