7/31/2019 MAN3353 Module 2 Lecture Content

1/19

Chapter 05 and 06

Decision Making,

Learning, Creativity,

Entrepreneurship

Planning, Strategy, andCompetitive Advantage

7/31/2019 MAN3353 Module 2 Lecture Content

2/19

5-2

The Nature of Managerial Decision Making

Decision making: Process by which managers respond to

opportunities and threats by analyzing options, and making

determinations about specific organizational goals and

courses of action

Programmed decision: Routine, virtually automatic decision

making that follows established rules or guidelines

Non-programmed decisions: Non-routine decision making

that occurs in response to unusual, unpredictableopportunities and threats

In the absence of decision rules managers may rely on their

intuition

7/31/2019 MAN3353 Module 2 Lecture Content

3/19

5-3

The Classical Model of Decision Making

7/31/2019 MAN3353 Module 2 Lecture Content

4/19

5-4

The Administrative Model of DecisionMaking

An approach to decision making that explains why

decision making is inherently uncertain and risky and

why managers usually make satisfactory rather than

optimum decisions Bounded rationality, incomplete information

7/31/2019 MAN3353 Module 2 Lecture Content

5/19

5-5

Figure 5.4 - Six Steps in Decision Making

7/31/2019 MAN3353 Module 2 Lecture Content

6/19

5-6

Decision Making Steps

Step 1 - Recognize need for a decision

Sparked by stimuli such as changes in the organizationalenvironment

Managers who actively pursue opportunities to use thesecompetencies create the need to make decisions

Step 2 - Generate alternatives

Managers must develop feasible alternative courses of

action Failure to properly generate and consider different

alternatives sometimes leads to bad decisions

It is hard to develop creative alternative solutions

7/31/2019 MAN3353 Module 2 Lecture Content

7/195-7

Decision Making Steps

Step 3 - Assess alternatives Key to a good assessment of the alternatives

Define the opportunity or threat exactly

Specify the criteria that should influence the selection ofalternatives

Step 4 - Choose among alternatives

Rank the various alternatives and make a decision

There is a tendency for managers to ignore critical

information, even when available

7/31/2019 MAN3353 Module 2 Lecture Content

8/195-8

Decision Making Steps

Step 5 - Implement chosen alternative

Managers must now implement the selected course ofaction

Implementing the chosen course of action would requiremaking subsequent decisions

Managers should take up the responsibility for makingthe follow-up decisions necessary to achieve the goal

Step 6 - Learn from feedbackCompare what happened to what was expected to happen

Explore why any expectations for the decision were not met

Derive guidelines that will help in future decision making

7/31/2019 MAN3353 Module 2 Lecture Content

9/195-9

Group Decision Making

Superior to individual decision making in several respects

There are, however, perils that must be realized.

Groupthink

Pattern of faulty and biased decision making that occurs ingroups

Members strive for agreement among themselves at the

expense of accurately assessing information relevant to a

decision Devils advocacy: Critical analysis of a preferred alternative

to ascertain its strengths and weaknesses before it is

implemented

7/31/2019 MAN3353 Module 2 Lecture Content

10/195-10

Organizational Learning and Creativity

Organizational learning: Process through which

managers seek to improve an employees desire and

ability to understand and manage the organization and

its task environment Creativity: Decision makers ability to discover original

and novel ideas that lead to feasible alternative courses

of action

Innovation: Implementation of creative ideas in an

organization

7/31/2019 MAN3353 Module 2 Lecture Content

11/195-11

Entrepreneurship and Creativity

Entrepreneurs: An individual who notices opportunities

and decides how to mobilize the resources necessary to

produce new and improved goods and services

Social entrepreneurs: Individuals who pursue initiativesand opportunities to address social problems and needs

in order to improve society and well-being

Intrapreneur: A manager, scientist, or researcher who

works inside an organization and notices opportunities

to develop new or improved products and better ways

to make them

7/31/2019 MAN3353 Module 2 Lecture Content

12/196-12

Planning and Strategy

Planning: Identifying and selecting appropriate goals

and courses of action for an organization

Strategy: A cluster of decisions about what goals to

pursue, what goals to pursue, what actions to take, andhow to use resources to achieve goals

Mission statement: Broad declaration of an

organizations purpose that identifies the organizations

products and customers and distinguishes the

organization from its competitors

7/31/2019 MAN3353 Module 2 Lecture Content

13/196-13

Figure 6.1 - Three Steps in Planning

7/31/2019 MAN3353 Module 2 Lecture Content

14/19

6-14

Figure 6.3 - Levels and Types ofPlanning

7/31/2019 MAN3353 Module 2 Lecture Content

15/19

6-15

Determining the OrganizationsMission and Goals

Defining the business

Who are our customers?

What customer needs are being satisfied?

How are we satisfying customer needs

Establishing major goals

Provides the organization with a sense of direction

Stretches the organization to higher levels of performance

Goals must be challenging but realistic

Strategic leadership: Ability of the CEO and top managers to

convey a compelling vision of what they want the

organization to achieve to their subordinates

7/31/2019 MAN3353 Module 2 Lecture Content

16/19

6-16

Formulating Strategy

Development of a set of corporate, business, and

functional strategies that allow an organization to

accomplish its mission and achieve its goals

SWOT analysis Planning exercise in which managers identify:

Organizational strengths and weaknesses

Environmental opportunities and threats

7/31/2019 MAN3353 Module 2 Lecture Content

17/19

6-17

Formulating Business-Level Strategies

Low-cost strategy: Driving the organizations total costsdown below the total costs of rivals

Differentiation strategy: Distinguishing an organizationsproducts from the competitors products on dimensions such

as product design, quality, or after-sales service Stuck in the middle : Attempting to simultaneously pursue

both a low cost strategy and a differentiation strategy

Focused low-cost: Serving only one segment of the overallmarket and trying to be the lowest cost organization serving

that segment Focused differentiation: Serving only one segment of the

overall market and trying to be the most differentiatedorganization serving that segment

7/31/2019 MAN3353 Module 2 Lecture Content

18/19

6-18

Formulating Corporate-Level Strategies

Concentration on a single industry: Reinvesting a

companys profits to strengthen its competitive position

in its current industry

Vertical integration: Expanding a company

s operations

either backward into an industry that produces inputs

for its products or forward into an industry that uses,

distributes, or sells its products

Diversification: Expanding a companys business

operations into a new industry in order to produce new

kinds of valuable goods or services

7/31/2019 MAN3353 Module 2 Lecture Content

19/19

6-19

International Expansion

Global strategy: Selling the same standardized product

and using the same basic marketing approach in each

national market

Ignoring national differences, may leave organizations

vulnerable to local competitors

Multi-domestic strategy: Customizing products andmarketing strategies to specific national conditions

Significant cost savings associated with not having to

customize products and marketing approaches

Helps gain local market share

Raises production costs thereby leading to higher prices