1. Management
Planning

2. Continuation of strategic planning
Corporate strategy is for the whole organisation.
It is informed by Steps 1-3 (Mission statement, current business model, SWOT)
Competitive strategy has 3 main directions: cost leadership, differentiation, focus.
Any strategy needs to be decided based on information (internal and external)

3. What is strategic leadership?
Strategic leadership - the ability to anticipate, envision, maintain flexibility, think strategically, and work with others in the organisation to initiate changes that will create a viable and valuable future for the organisation.

4. Who provides strategic leadership?
CEO – chief executive officer
Team of top managers:
COO – chief operating officer
CFO – chief financial officer
CIO – chief information officer

5. Effective strategic leadership (8 factors)

6. Need for strategic flexibility
Strategic flexibility - the ability to recognize major external changes, to quickly commit resources, and to recognise when a strategic decision was a mistake.
Move quickly!

7. Characteristics of strategic flexibility
Leadership unity
Flexible in allocating resources
Creative and problem solving mindset
Understand current strategies using monitoring and measuring results
Open communication with employees
New ideas and perspectives from outside the organisation
Multiple alternatives (plan b)
Reflective and learn from mistakes

8. eBusiness strategies For any business, to help lower costs.
Cost Leadership
On-line activities: bidding, order processing, inventory control, recruitment and hiring
Differentiation
Internet-based knowledge systems, online ordering and customer support
Focus
Chat rooms and discussion boards, targeted Web sites

9. Customer service strategies
Giving the customers what they want
Communicating effectively with them
Providing employees with customer service training

10. Innovation strategies
Possible Events
Radical breakthroughs in products
Application of existing technology to new uses
Strategic Decisions about Innovation
Basic research
Product development
Process innovation
First Mover - an organisation that brings a product innovation to the market or uses new process innovations.

11. Being a First Mover?

12. Planning
Decision Making

13. Today’s lecture We will learn: 8 step decision making process
How managers make decisions
Explain decision making conditions
Styles of decision making
Biases and errors of decision making
Identify effective decision-making techniques

14. Useful Vocabulary Decision criteria Rational decision making
Bounded rationality
Satisfice
Intuitive decision making
Structured problems
Programmed decision
Procedure
Rule
Policy
Unstructured problems
Non-programmed decisions
Risk
Linear thinking style
Heuristics

15. What is a decision?
Decision - making a choice from two or more alternatives
Problem - an obstacle that makes it difficult to achieve a desired goal or purpose

16. Summary of making a decision
Identifying a problem and decision criteria and allocating weights to the criteria
Developing, analysing, and selecting an alternative that can resolve the problem
Implementing the selected alternative
Evaluating the decision’s effectiveness

17. 8 steps process for decision making
Look at this diagram on p179

18. DMP – Step 1 – Identify the problem
Characteristics of Problems
A problem becomes a problem when a manager becomes aware of it
There is pressure to solve the problem
The manager must have the authority, information, or resources needed to solve the problem

19. DMP – Step 2 – Identify decision criteria
Decision criteria are factors that are important (relevant) to resolving the problem, such as:
Costs that will be incurred (investments required)
Risks likely to be encountered (chance of failure)
Outcomes that are desired (growth of the firm)

20. Example for Step 2
If you want to buy a laptop, here are some of the decision criteria you are likely to have…
Decision Making Criteria
Memory and storage
Battery life
Carrying weight
Warranty
Display quality

21. DMP – Step 3 – Allocating weights
Decision criteria are not of equal importance:
Assigning a weight to each item places the items in the correct priority order of their importance in the decision-making process.

22. Example for Step 3
To help you buy the laptop, you give each decision criteria a weighting to help decide which is most important…
Criteria
Weighting
Memory and storage 10
Battery life 8
Carrying weight 6
Warranty 4
Display quality 3

23. DMP- Step 4 - Alternatives
Identifying viable alternatives
Alternatives are listed (without evaluation) that can resolve the problem.
Alternatives
HP Probook
Sony VAIO
Lenovo IdeaPad
Apple Macbook
Toshiba Satellite
Sony NW
Dell Inspiron
HP Pavilion

24. DMP – Step 5 – Analysing Alternatives
Appraising each alternative’s strengths and weaknesses
An alternative’s appraisal is based on its ability to resolve the issues related to the criteria and criteria weight.

25. Example for Step 5a – marks out of 10 for each laptop

26. Example for Step 5b – multiplying each mark by the weighting

27. DMP – Step 6 – Selecting the alternative
Choosing the best alternative
The alternative with the highest total weight is chosen.

28. DMP – Step 7 – Implementing the alternative
Putting the chosen alternative into action
Conveying the decision to and gaining commitment from those who will carry out the alternative
So in this example, that would be convincing finance and her manager using her working out
Helpful to involve people in the decision making process

29. DMP - Step 8 – Evaluating decision effectiveness
The soundness of the decision is judged by its outcomes.
How effectively was the problem resolved by outcomes resulting from the chosen alternatives?
If the problem was not resolved, what went wrong? Did you identify the wrong problem?

30. Decisions manager make

31. Rational decision making
Rational Decision-Making - describes choices that are logical, in the best interests of the company and consistent. Perfect decision making!
Bounded Rationality - decision making that’s rational, but limited (bounded) by an individual’s ability to process information.
Satisfice - accepting solutions that are “good enough.”

32. Intuitive decision making
Making decisions on the basis of
experience
Feelings
accumulated judgment
Works alongside rational decision making
Works best if person understands their emotions and has experience

33. What is intuition?

34. Types of decisions

35. Programmed and non-programmed decisions
Programmed Decision - a repetitive decision that can be handled by a routine approach, eg, if a customer brings in a broken product, you repair or replace it.
Non-programmed Decisions - unique and nonrecurring decisions that require a custom-made solution, eg, heavy snow might make flying dangerous

36. Types of programmed decisions
Procedure - a series of interrelated steps that a manager can use to apply a policy in response to a structured problem, eg, need to buy 15 laptops, follow company purchasing procedure
Rule - an explicit statement that limits what a manager or employee can or cannot do, eg, not allowed to smoke in the building
Policy - a general, flexible guideline for making a decision about a structured problem, eg, the customer is always right and must be happy.

37. Programmed v. non-programmed

38. Decision making situations
Certainty
can make an accurate decision because the outcome of every alternative choice is known, eg, choosing a bank account based on interest accrued.
Risk
a situation in which the manager is able to estimate the likelihood (probability) of outcomes that result from the choice of particular alternatives, eg, expanding a hotel as you have lots of data to make the decision

39. Decision making situations
Uncertainty
Limited information makes it difficult to know the outcomes
Limited information forces managers to rely on intuition, hunches, and “gut feelings.”
Maximax: optimistic, to maximize the maximum payoff (assume the best, get the most)
Maximin: pessimistic, maximize the minimum payoff (assume the worse, use the best worst)
Minimax: the manager’s choice to minimize maximum regret.

40. Payoff matrix – Maximax – chosing the best payoff out of all Strategies

41. Payoff matrix – Maximin – chosing the best worst payoff for each Strategy

42. Regret matrix – Minimax – Best CA payoff

43. Regret matrix – Minimax – Best CA payoff minus each CA
Regret matrix – Minimax – Best CA payoff minus each CA. Then choose least worst S overall

44. Decision Making Styles

45. Decision making styles
Linear Thinking Style - a person’s tendency to use external data/facts; the habit of processing information through rational, logical thinking.
Nonlinear Thinking Style - a person’s preference for internal sources of information; a method of processing this information with internal insights, feelings, and hunches.

47. Decision making biases and errors
Heuristics - using “rules of thumb” to simplify decision making.
Overconfidence Bias - holding unrealistically positive views of oneself and one’s performance.
Immediate Gratification Bias - choosing alternatives that offer immediate rewards and avoid immediate costs.

48. Decision making biases and errors (cont.)
Anchoring Effect - fixating on initial information and ignoring subsequent information.
Selective Perception Bias - selecting, organizing and interpreting events based on the decision maker’s biased perceptions.
Confirmation Bias - seeking out information that reaffirms past choices while discounting contradictory information.

49. Decision making biases and errors (cont.)
Framing Bias - selecting and highlighting certain aspects of a situation while ignoring other aspects.
Availability Bias - losing decision-making objectivity by focusing on the most recent events.
Representation Bias - drawing analogies and seeing identical situations when none exist.
Randomness Bias - creating unfounded meaning out of random events.

50. Decision making biases and errors (cont.)
Sunk Costs Errors - forgetting that current actions cannot influence past events and relate only to future consequences.
Self-Serving Bias - taking quick credit for successes and blaming outside factors for failures.
Hindsight Bias - mistakenly believing that an event could have been predicted once the actual outcome is known (after-the-fact).

51. Today’s decision making
Guidelines for making effective decisions:
Understand cultural differences
Know when it’s time to call it quits
Use an effective decision making process
Habits of Highly Reliable organisations (HROs)
Are not tricked by their success
Defer to the experts on the front line
Let unexpected circumstances provide the solution
Embrace complexity
Anticipate, but also anticipate their limits

52. Overview of managerial decision making

53. Personal Reflection What sort of decision maker are you?
What was the hardest decision you have ever made? How did you make it?
How did you feel making difficult decisions?
Which biases and errors are you most likely to make?

54. Summary Today: Problems and decisions Decision making
Types of decision
Decision biases and errors
Tomorrow:
Quiz about all this week’s topics!

55. Homework for the Weekend
Learn this week’s vocabulary
Finish your Personal Time Management Plan and bring it to the tutorial on Monday
Complete a draft of your Assignment 1, Part A plan. Bring it to the tutorial on Monday to get some feedback.
Start to research for your Assignment
Read Chapter 10 on Organisations