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Decision Making
Dr. Rajnikant Patel
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WHAT IS DECISION ?
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The Nature of Managerial Decision Making
Programmed Decision Making. Solutions to routine problems determined by
rule,procedure or habits.
Non Programmed Decision Making. Specific solutions created through an
unstructured process to deal with non
routine problems.
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Types of Decisions
COMPLEXITY OF
PROBLEM
LOW HIGH
UNCERTAINTYOF
OUTCOME
HIGH JUDGMENTAL ADAPTIVE
LOW ROUTINE
ANALYTICAL
-Personal and Organizational - Chester Barnard
-Four Types of Decisions on the bases of Complexity ofProblem and Certainty of Outcome
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The Nature of Managerial decision Making.
Certainty, Risk and Uncertainty.
High Low
UncertaintyRiskCertainty
Managerial Control
The continuum of Decision Making Conditions
KNOWLEDGE
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Models of Decision Making
The Rational Model
A Four Step Process Especially Used for
Non-programmed Decisions. Weighs Different Alternatives & Choose The
Alternative With Best Chance Of Success.
The Non-Rational Model
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The Rational Model
Also Known As Economic Man Model
Behaves On Economic Rationality Of Consumer &Tries To Maximize Output.
Certain Assumptions Made Under This Model
Complete Information Regarding Problem IsAvailable
Information Of Any Time Slot Can Be Recalled
All Alternatives Are Available
Accurate Ranking To Available Alternatives IsPossible
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The Rational Model
2. Develop the
Alternatives
3.Evaluation &
Selection of
Alternative
4. Implement
& Monitor
1. Investigate the
Situation
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Searchingfor
alternatives
Implementing
decisions
Follow-upand
control
Settingmanagerialobjectives
Comparing &evaluating
alternatives
The act
of choiceTakecorrectiveaction asnecessary
Renew
search
Revise orupdate
objectives
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Stage 1: Investigate The Situation
Define Problem
Diagnose Causes
Identify Decision Objectives
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Stage 2: Develop Alternatives
Seek Creative Alternatives
Brainstorming
Nominal Groping
Do not Evaluate The Alternatives WhileGenerating Alternatives.
Temptation To Accept First Feasible Alternative Prevents Managers
From Finding Best Solution
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Stage 3: Evaluation & Selection Of
Alternatives
Evaluate Alternatives
Is This Alternative Feasible?
Is The Alternative Satisfactory Solution?
Select Best Alternative
What are the consequences for the rest of
Organization.
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Stage 4: Implement & Monitor
Plan Implementation
Implement Plan
Monitor Implementation & Make Necessary
Adjustments
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Significance & Limitations of
Rational Model
Significance
High Quality Solution
Clear Understanding Of Alternative
Selection of Best Alternative with Regards to Objectiveis Possible
Limitations of Rational Model
Uncertainty of Future
All Possible Alternative are Difficult to Determine
Difficulty in Unexploited Area
Lake of Resources Like Time, Money, Information etc.
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The Non Rational Model
In real world situation best rational Decision Making is not
always possible.
To overcome this problem non rational Model is required.
Also known as administrative man model
Satisficing Model
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Rational Model In Perspective
Three Concepts That Help In Decision
Making
Bounded Rationality
Satisfice
Heuristics
Availability
Representativeness Anchoring & Adjustment
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Non Quantitative Techniques
Brainstorming
Synetics
Nominal Grouping
Delphi Technique
Decision Tree
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Quantitative Techniques
Probability Theory
Game Theory
Queuing Theory
Linear Programming
PERT and CPM
Decision Tree
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Thanks