Sri Sairam Institute of Technology 2

Prepared by :Dr. K. BARANIDHARAN

PROF.MBASRI SAIRAM INSTITUTE OF TECHNOLOGY

CHENNAI

ENGINEERING ECONOMICS

AND FINANCIAL

ACCOUNTING

Engineering Economics&

Financial Accounting

Ee&fa3April 8, 2023

Types of Managerial decision making

Basic • Basic decisions are those which are unique,

one-time decisions involving long-range commitments of relative permanence or duration, or those involving large investments.

• Examples of basic decisions in a business firm include plant location, organization structure, wage negotiations, product line, etc. In other words, most top management policy decisions can be considered as basic decisions.

Routine • Routine decisions are at the opposite extreme from basic

decisions. They are the everyday, highly repetitive, management decisions which by themselves have little impact on the overall organization. However, taken together, routine decisions play a tremendously important role in the success of an organization.

• Examples of, routine' decisions are an accountant's decision on a new entry, a production supervisor’s decision to appoint a new worker, and a salesperson's decision on what territory to cover. Obviously, a very large proportion of the decisions made in an organization are of the routine variety. However, the exact proportion of basic to routine types depends on the level of the organization which the decisions are made.

. Programmed and Non-programmed Decisions

• programmed Decisions

The difference between Programmed (routine, repetitive) decisions and Non-programmed (unique, one-shot) decisions.

• While programmed decisions are typically handled through structured or bureaucratic techniques (standard operating procedures),

• non-programmed decisions must be made by managers using available information and their own judgement. As is often the case with managers, however, decisions are made under the pressure of time.

Mechanistic • If a decision is a routine and repetitive in nature

it is called mechanistic decision.• The number of variables in decision making are

relatively limited.• There are clear cut alternative for taking

mechanistic decisions and each alternative has a well defined outcome.

• Example: if I know how many computers gets sold in a computer exhibition (from my experience, I have been participating in the Industrial exhibition for the last….

Analytical • Complex nature, they have large number of

variables.• But the outcome of each alternative can be

computed.• The problem pertain to engineering, production,

maintenance, project management, fall under this category.

• These are complex in nature Yet, they can be solved.

• OR and Management Science provide an array of tools and techniques such as linear programming, inventory models, queuing theory, PERT/CPM to determine optimal solutions.

Judgemental • Limited number of decision variable

and each decision alternatives has unknown outcomes, it is called a judgemental decision.

• Manager take judgemental decisions while dealing with problems in most of the functional areas of management such a personnel, marketing, production, R&D etc

Adaptive • There are large number of decisions

variables with lot of uncertainty over the outcomes, it is a case of adaptive decision.

• Even managers find it difficult to reach a consensus on decision strategies.

• Such decisions cannot be structured for easy solutions.

• Managers of diverse technical skills are normally required to handle such decisions.

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Certainty, Risk, Uncertainty, Ambiguity ● Certainty

● all the information the decision maker needs is fully available● Risk

● decision has clear-cut goals● good information is available● future outcomes associated with each alternative are subject to

chance● Uncertainty

● managers know which goals they wish to achieve● information about alternatives and future events is incomplete● managers may have to come up with creative approaches to

alternatives● Ambiguity

● by far the most difficult decision situation● goals to be achieved or the problem to be solved is unclear● alternatives are difficult to define● information about outcomes is unavailable