1. 1-1 Review ●What is SWOT? ●What are Porter’s Generic Strategies? ●What is the Miles and Snow Typology? ●What is the Product Life Cycle? ●What types of diversification strategies are there? –What are there strengths/weaknesses? ●How does one evaluate opportunities? –BCG Matrix –GE Business Screen ●What is the Prisoners’ Dilemma?

2. 1-2 Decision Making and Problem Solving ●Choosing one alternative from among a set of alternatives. –Not simply multiple choice –You also have to identify the choices ●Types of decisions –Programmed  Structured and re-occurs –Nonprogrammed  Unstructured and infrequent ●Examples?

3. 1-3 Decision Making Conditions ●Certainty –Know all alternatives –Know outcome for each alternative ●Risk –Know all alternatives –Each alternative has a probability ●Uncertainty –Do not even know all the alternatives ●Examples

4. 1-4 Classical Decision Making Theory ●Obtain complete and perfect information on alternatives ●Eliminate uncertainty ●Evaluate alternatives Practice ●Good or bad approach?

5. 1-5 Rational Decision Making Theory 1.Recognize and define the decision situation - Sometimes hard to see the problem 2.Identify alternatives 3.Evaluate alternatives 4.Select best alternative 5.Implement choice 6.Evaluate results Practice ●Sometimes projects go on too long when should be killed ●People get invested in a particular approach ●Just because it is “rational” doesn’t mean it will produce good results. E.g. New Coke, Netflix, others?

6. 1-6 Administrative Model Theory ●Describes how decisions are made, not how they should be made ●Characteristics –Bounded Rationality  Decision makers are limited by skills and incomplete information –Satisficing  Search until find solution meeting min. req. ●Does not necessarily lead to the “best” decisions ●Examples

7. 1-7 Other Factors in Decision Making Practice ●Political forces –Power of customers and suppliers  McDonalds Styrofoam, animal testing, etc. ●Intuition –As opposed to “Paralysis by Analysis” ●Escalation of commitment –Sticking with a decision even when looks wrong –“Sunk costs are sunk” ●Risk propensity –Willingness to take and comfort with risk

8. 1-8 Group Decision Making Practice ●Interactive groups (teams) ●Delphi groups –Ask group of experts for opinion, e.g. on date –Average the inputs and repeat until consensus ●Nominal groups –Group in name only –Bring experts together, get ideas, and vote ●Manager implications: –If you ask, be prepared for all responses –Do you retain the right to accept or reject?

9. 1-9 Group Decision Making ●Advantages –More information –More alternatives –Greater acceptance –May get better comm. –Usually better decisions ●Disadvantages –Slower –Costlier –Compromises are not necessarily better decisions –One person may dominate –“Groupthink” where desire for consensus overwhelms getting to correct decision

10. 1-10 Managing Group Decision Making Practice ●Need to be careful that you don’t abdicate your responsibility ●Need to be careful that you don’t empower group and then take it back ●Set deadlines ●Carefully select members ●Make it clear that all decisions will be subject to testing and scrutiny

11. 1-11 Exercise ●Deal or No Deal –You have a 50/50 chance of getting either $500,000 or $1. I offer you either those odds or $200,000 guaranteed. What do you take? –You have a 50/50 chance of either losing $100 or losing $1. I offer you either those odds or a guaranteed loss of $45. What do you take? ●What affects your decision? –Expected value –Expected utility

12. 1-12 More Mental Exercises Exercise C 1.Have a 3K sq. ft. home when everyone else has 4K sq. ft. or 2.Have a 2K sq. ft. home when everyone else has a 1K sq. ft. home Exercise D 1. Get 4 weeks vacation when everyone else gets 6 weeks or 2.Get 2 weeks vacation when everyone else gets 1 week.

13. 1-13 Videos ●DVD – McDonalds – One Owner ●DVD – Google Ch. 5, Guess Where Google is Now